2012 Annual Report

Capital Drilling
ANNUAL REPORT 2012
CAPITAL DRILLING AT A GLANCE
Who we are
High growth drilling company providing services to mining exploration and energy companies. Focus on emerging and developing markets. Currently own 93 rigs.
DRILLING TYPES (2012)

Energy 6%
Exploration 7% Production 21%
What we do
Exploration, development, production and underground drilling in Africa, Asia and Latin America. High quality, long standing customer base includes AngloGold, Barrick, BHP Billiton, Centamin Egypt, First Quantum and Kinross.
Development 66%
CLIENT TYPES (2012)

Junior 4% Mid Tier 23%
Major 73%
Fleet Profile (2012)

Reverse Circulation, 15 Underground, 4 Deep Hole Diamond, 9
Production, 12
Multi-purpose, 9
Diamond, 44
Capital Drilling limited Annual Report 2012
Well Positioned for the Future

Despite market uncertainties, we have achieved record revenue for the group and a strong ARPOR at a time when the Company has also invested heavily in CAPEX, leaving Capital Drilling particularly well positioned as we move forward. With the majority of our revenue from Major miners, one of the youngest fleets in the industry and a strong balance sheet we remain confident of being able to grow our market share despite headwinds in the industry.
Contents
2 3 4 6 10 12 13 Highlights Financial Summary Chairman / Interim CEO Statement Chief Financial Officers Report Directors Profile Executive Committee Members Financial Report
Highlights
Revenue up 21.8% to USD158.9 million EBITDA up 9.1% to USD37.1 million EBIT down 8.3% to USD20.9 million NPAT down 19.8% to USD14.1 million Diluted EPS down 19.8% to 10.5 cents NAV per share up 17.9% to $0.69 per share Return on capital employed decrease from 28.2% to 19.8% Maintained elevated levels of utilisation at 76% for 2012, well above industry Strong increase in ARPOR profile, rising 22% to $192,000 for 2012 Rising exposure to major mining houses at 73% of 2012 revenue
2012 2011 Change $m $m %

88 76 192,000 158.9 37.1 20.9 14.1 78 82 158,000 130.5 34.0 22.8 17.6 +13 -7 +22 +22 +9 -8 -20
Average Fleet Size Fleet Utilisation (%) ARPOR ($) Revenue EBITDA EBIT Net Profit After Tax Earnings per share Basic (cents) Diluted (cents) Net Asset Value per share (cents) Return On Capital Employed (%) Return on Total Assets (%) Net Debt / Cash Net Debt to Equity (%)
All amounts are in USD unless otherwise stated
10.5 10.5 69.2 19.8 16.2 20.0 21.4
13.1 13.0 58.8 28.2 21.3 14.6 18.5
-20 -20 +18 -30 -24 +36 +16
Financial Summary
REVENUE
180 180 160 160 140 140
120 120 100 100 80 80 60 60 40 40 20 20 0 0
NPAT
158.9 130.5
20 20 18 18 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0
17.6 14.1 11.2 7.1
75.3 59.0
FY09
FY10 Revenue (in US$m)
FY11
FY12 FY12
FY09
FY10 FY10
FY11 FY11
FY12 FY12
NPAT US$m
Gearing
35 35
Ebitda
40 40
30 30 25 25 20 20 15 15 10 10 5 5 0 0
45.2%
50% 29.1 40% 30% 20% 10%
35 35 30 30
34.0 26.5 % 21.7% 12.8 19.9 26.1%
37.1
40% 35% 30% 25%
25 25 20 20 15 15 10 10 5 5 0 0
15.5
18.1
18.7
21.4% 18.5%
23.4%
20% 15% 10% 5% 0%
FY09
-0.3% FY10
FY11
FY12
0 -10%
FY09
FY10 EBITDA (in US$m)
FY11 FY11
FY12 FY12 EBITDA (%)
Total debt
Net debt to Equity (%)
NAV Per Share

0.8 0.8 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0 0
FY09 FY10 FY11 FY12
Return On Total Assets

0.69
25 25 20 20
22.6% 18.3% 15.4% 18.3%
23.5% 21.3% 16.2% 14.8%
0.52 0.37
0.59
15 15 10 10 5 5 0 0
FY09 FY09
FY10 ROIC (%)
FY11
FY12 FY12
NPAT (ROTA (%)
Chairman / Interim CEO Statement
Dear Shareholders
2012 was a year of mixed results for Capital Drilling; we selectively grew our market share, generated record revenues, and made a substantial investment in our business to provide a stronger platform for future growth. Our first half performance was a record while the second half performance did not deliver to management expectations due to the external demand environment softening in the fourth quarter of the year and the slowdown in client activity in this period. Combined with the disruptions experienced in Egypt, this impacted the Groups 2012 results. Capital Drilling delivered a record of $158.9 million of revenue, an increase of 22% on 2011. EBITDA improved 9% on 2011, rising to $37.1 million. The Group did however record a fall in EBIT and NPAT of 8% and 20% respectively, with NPAT impacted by higher tax charges resulting from a change in geographical contributions to the Groups results. Group returns were again solid, with 2012 Return on Capital Employed (ROCE) of 19.8% and Return on Total Assets (ROTA) of 16.2%. Capital Drillings strategy of expanding our service offering continued to develop in 2012, with the commencement of underground drilling services in Ghana and Egypt. The Group added a further (net) eight rigs to the fleet over the year, representing 9% year on year growth, commencing 2013 with 93 rigs in the fleet. This fleet growth is slightly below long term growth rates and we expect 2013 to also reflect this trend as we seek to utilise existing assets in a more subdued demand environment, with growth CAPEX to be driven by new tender wins rather than through existing client demand.
Rig utilisation for the Group softened in 2012, reducing from 82% for 2011 to 76% for the year. Activity levels weakened in the fourth quarter with some clients reducing their activities sooner than in previous years due to greater adherence to budgeted spend in a more cost conscious environment. This has been a growing trend in the industry as management teams increasingly look to improve cost efficiencies and capital discipline in a more difficult environment. Figure 2:
Rig Utilisation
90% 80% 70% 64% 57% 60% 59% 84% 79% 74% 83% 76%
Figure 1:
60% 50% 40% 30%
Annual Fleet Growth

No. of rigs
20% 93 85 74 60 49 10% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12
100 90 80 70 60 50 40 30 20 10 0 19 11 25
The Groups final revenue KPI, Average Revenue per Operating Rig, performed strongly for the year, improving from $158,000 per month for 2011 to $192,000 per month for 2012. The improved performance reflected an improved contract mix and the full year impact of previous rate rises.
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Jan12
Jan13
Chairman / Interim CEO Statement
Figure 3:
ARPOR
USD000
Health and Safety

The Group continues with its strong focus on a safety culture, supported by our Training and Development programs which include the provision of training services for our clients. We recorded a solid improvement in our safety performance in 2012, with our key measure, the All Injury Frequency (days free) Rate (AIFR) reducing from 2.84 to 1.82 injury related incidents per 200,000 man hours. Project milestones in 2012 for Lost Time Injuries (LTIs) include: Egypt Thani Dubai Shalateen Mauritania Tasiast Tanzania Geita Solomon Islands Gold Ridge Ghana Chirano 500 days (May 2012) 500 days (August 2012) 2,000 days (October 2012) 500 days (February 2013) 500 days (February 2013)
250 200 164 150 100 50 0 156 133 137 138 119 123 134 148 160 186 209 184
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12
Outlook
The past year has seen a changing of the guard among many of our clients and the mining industry in general. Investors have demanded a new agenda of capital discipline with a stronger focus on capital management and shareholder returns. This move away from a growth agenda to a cost and capital focus is leading to a reduction in demand for drilling services as demonstrated by softer utilisation rates being reported by the drilling companies. We are however continuing to see expansion opportunities within our customer base as well as a number of new opportunities for growth. As we commence 2013 we are cautiously optimistic of an improved performance. Despite the weaker demand environment we continue to work with a high quality client list and have maintained robust levels of utilisation which are trending above reported industry levels. The Groups substantial investment in capital equipment over the past two years, with one of the most modern drilling fleets in the industry, positions us well for the periods ahead. With available capacity and a fleet averaging four years in age, we expect a substantial reduction in our capital requirements over the year ahead, positioning the Group well for cash generation during this period. Furthermore the Group maintains a conservative gearing profile with significant balance sheet headroom and flexibility should new opportunities be converted. I once again would like to take this opportunity to thank all employees, business partners, shareholders, our Board of Directors and all stakeholders for their continued support.
Over the past two years Capital Drilling has made a substantial capital investment of over $50 million in new rigs, upgrading the standards of the assets within the existing fleet as well as investing in our systems and practices to improve business efficiency. We have strategically targeted the major mining houses as our key customers, in parallel with a key asset approach to these customers, namely targeting low cost of production and long life of mine assets. The strategy has been successfully implemented with major mining companies representing 73% of Group revenue in 2012. Further, it has allowed Capital Drilling to grow with our clients, continuing the expansion of services provided, with the Group now providing underground drilling services at two sites in Africa.
Corporate Update
2012 saw some significant management changes within the Group. We announced the departure of our former CEO in November 2012 and the Board has reached advanced discussions with prospective candidates. While this is clearly a critical role, we are fortunate to have a strong management team already in place, which includes the founding shareholders all of whom remain committed to delivering results for shareholders. A further update will be given in due course. A number of structural initiatives introduced in the past 12 months have proven to add to the discipline and robustness of the business and we are confident of the team delivering results in the years ahead. These initiatives have increased rigour around CAPEX allocations, maintenance planning, operational performance and cost discipline, all of which contribute to a more robust platform for future growth.
Jamie Boyton Executive Chairman and Interim Chief Executive Officer
Chief Financial Officers Report
The 2012 financial year marked our second full year as a listed entity. The Group generated record revenue amidst some significant challenges both in the internal and external environments; however the full benefit of these revenues did not flow through to the Groups net profit. Softening activity levels in the third and fourth quarter, including political disruptions in Egypt, applied pressure to revenues. The lag in reducing costs to match the reduced activity levels impacted full year earnings, resulting in lower margins and a decrease in earnings per share. Despite this, the Group moves into 2013 with a strong balance sheet and conservative debt levels with a net gearing ratio (net debt/equity) of 21% and significant unutilised debt facilities providing flexibility. Net equity increased to $93.2 million. Despite the challenges faced over the year the Group achieved record revenues of $158.9 million which is a 22% growth YoY. The second half of the year however experienced challenging conditions with a softening of growth rates due to reduced ARPOR and utilisation. We have however started 2013 with a number of long-term contracts giving us reasonable visibility of revenues for the rest of the year. Rig utilisation softened in 2012, reducing from 82% in 2011 to 76% for the year. ARPOR however improved 22% YoY to an average of $192,000 per month for the year. In addition, the weighted average fleet expanded by 9%. The drop in rig utilisation was particularly marked in the fourth quarter with some clients bringing 2012 drilling programmes to an end earlier than initially anticipated due to tighter budgetary control, applied in the more challenging environment. The improvement in ARPOR is largely driven by a favourable contract mix and the full year impact of previous rate rises.
The abrupt conclusion of drilling programmes by some clients applied pressure to profitability as the Groups cost reductions could not respond at the same pace, which resulted in a decrease in the gross profit margin for the year to 33% (2011 35%). Combined with a higher depreciation charge due to the full year impact of the significant 2011 asset additions the group saw a decrease in EBIT of 9% YoY. Net profit decreased by 20% YoY due to higher interest costs attributable to a higher average net debt position compared to 2011 as well as a higher effective tax rate, which increased to 25% (2011 19%), due to a change in the geographical contribution of earnings which were primarily in higher tax jurisdictions. Basic earnings per share decreased by 20% to 10.5 cents per share on a weighted average number of shares of 134,592,800 from 13.1 cents per share on a weighted average number of shares of 134,592,800 shares in 2011.
Statement of Financial Position

As at 31 December 2012, the Statement of Financial Position showed continued strength and improvement with net equity increasing to $93.2 million. This position is a result of the contribution of 2012 retained earnings and overall asset growth for the year. With a relatively low debt to equity ratio, the business continues to enjoy flexibility to enable it to capitalise on growth opportunities as they arise. The 18% YoY increase in current assets to $66.7 million was as a result of expansion of the Groups inventory levels in line with the growth in rig count, combined with higher trade receivables from a larger revenue base. Trade payables increased in line with the growth in activity levels, this combined with the timing of period end cash collections accounts for the marginal increase in cash and cash equivalents of $9.1 million compared to $7.7 million as at 31 December 2011.
Statement of Comprehensive Income (Summary)

Reported
Revenue $m EBITDA $m EBITDA % EBIT $m PBT $m NPAT $m Basic EPS (cents) Diluted EPS (cents)
Statement of Financial Position (Summary)

2012 $m
Non-current assets Current assets Total Assets Current liabilities Non-current liabilities Total Liabilities Total Shareholders Equity 74.1 66.7 140.9 17.9 29.8 47.6 93.2
2012
158.9 37.1 23.4% 20.9 18.9 14.1 10.5 10.5
2011
130.5 34.0 26.1% 22.8 21.7 17.6 13.1 13.0
2011 $m
61.6 56.6 118.2 30.1 9.0 39.1 79.1
In line with the increase in the year end drilling fleet to 93 rigs (increase YoY of 9%), the net property, plant and equipment of the business increased by 20% to $74.0 million. Gross debt increased by $10.4 million and was utilised to finance capital expenditure. The Group saw a slight improvement in cash generation in 2012. The higher revenue levels partially offset the slightly lower margins and the reduced working capital outflow, from a slower rate in growth of accounts receivable, and inventory relative to revenue, contributed to a significant $24.1 million being generated from operations. Net cash used in investing activities was $29.4 million, an 18% increase on 2011. The Groups drilling fleet expanded by 8 rigs (net of disposals), an increase of 9%. Cash from financing activities was $10.4 million, being debt drawn to finance the acquisition of fixed assets with respect to the increase in drilling fleet. The Groups cash position at year end was $9.1 million and total debt increased to $29.1 million. The net debt position of the business was $20 million (2011 $14.6 million) and, as a result, net gearing (net debt/equity) was 21% (2011 19%). A reconciliation of the movement in the net cash position is found below.
Reconciliation of Cash Position

2012 $m
Net (Debt) Cash at beginning of year (Decrease) Increase in cash and cash equivalent Increase in loans Net (Debt) cash at end of year (14.6) 5.0 (10.4) (20.0)
2011 $m
0.2 (14.2) (0.6) (14.6)
Treasury and Risk Management

The Group operates under standard finance procedures with a centralised treasury function. As a result, the majority of receivables are centrally received to mitigate any in country cash risk and therefore cash and cash flow is managed by Head Office. The Group does not undertake any formal currency hedging, though it endeavours to increase the percentage of all transactions in USD denominations as an informal hedge.
Critical Accounting Policies

The Financial Statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The principal accounting standards are set out in the Groups financial statements. The Financial Statements have been prepared on the historical cost basis and are presented in USD, given the Groups transactions are primarily denominated in US dollars.
Statement of Cash Flow (Summary)

2012 $m
Net Cash from Operating Activities Net Cash used in Investing Activities Net Cash from Financing Activities Net (Decrease) Increase in Cash and Cash Equivalents Cash Balance at Beginning of Period Cash Balance at End of Period 24.1 (29.4) 10.4 5.0 4.0 9.1
2011 $m
10.1 (24.9) 0.6 (14.2) 18.2 4.0
Property, Plant and Equipment

The Group depreciates all fixed assets over their estimated useful lives, less any pre-agreed salvage value. The carrying value of fixed assets are reviewed annually or more frequently if a triggering event occurs.
Taxation
A deferred tax asset and liability is recorded in the Statement of Financial Position. The Group has tax losses carried forward of $10.3 million (2011: $7.2 million) with a tax value of $2.9 million (2011: $2.0 million) available for offset against future profits. A deferred tax asset has been recognised to the value of $0.2 million (2011: $0.5 million) in respect of such losses. No deferred tax asset has been recognised in respect of the remaining tax losses amounting to $8.8 million (2011: $5.4 million) with a tax value of $2.7 million (2011: $1.5 million) as there is uncertainty whether there will be sufficient future taxable profits available to offset these losses. These losses may be carried forward indefinitely.
Currency fluctuations
The Group receives the majority of its revenues in US dollars. However, some of the Groups costs are in other currencies in the jurisdictions in which it operates. Foreign currency fluctuations and exchange rate risks between the value of the US dollar and the value of other currencies may increase the cost of the Groups operations and could adversely affect the financial results. As a result, the Group is exposed to currency fluctuations and exchange rate risks. To minimise the Groups risk, the Group tries to match the currency of operating costs with the currency of revenue.
Operating risks
Operations are subject to various risks associated with drilling including, in the case of employees, personal injury and loss of life and, in the Groups case, damage and destruction to property and equipment, release of hazardous substances to the environment and interruption or suspension of drill site operations due to unsafe drill operations. The occurrence of any of these events could adversely impact the Groups business, financial condition, results of operations and prospects, lead to legal proceedings and damage the Groups reputation. In particular, clients are placing an increasing focus on occupational health and safety, and deterioration in the Groups safety record may result in the loss of key clients.
Share Based Payments

The 3 million share options which had been issued in January 2012 to the former CEO were cancelled in line with the termination of the employment contract. No additional share options were issued in 2012.
Primary Risks
The Group operates in environments that pose various risks and uncertainties. The primary risks associated with the business are:
Fluctuation in levels of mineral exploration

The Group is highly dependent on the levels of mineral exploration, development and production activity within the markets in which it operates. A reduction in exploration, development and production activities, or in the budgeted expenditure of mining and mineral exploration companies, will cause a decline in the demand for drilling rigs and drilling services.
Business interruptions and weather conditions

Significant business interruptions as a result of natural disasters, extreme weather conditions, unstable drilling sites, regulatory intervention, delays in necessary approvals and permits or delays in supplies, may reduce the Groups ability to complete drilling services, resulting in performance delays, increased costs and loss of revenue. As operations are conducted outdoors, they are generally vulnerable to weather and environmental conditions. The Group operates in a variety of locations, some of which are prone to extreme weather conditions. High rainfall can significantly impact drilling activity, as well as impede the ability to move drilling rigs between drill sites. Accordingly, weather conditions as well as natural disasters may adversity impact the financial performance of the Group.
Key personnel and staff retention

The Groups ability to implement a strategy of pursuing expansion opportunities is dependent on the efforts and abilities of its executive directors and senior managers. In addition, the Groups operations depend, in part, upon the continued services of certain key employees. If the Group loses the services of any of its existing key personnel without timely and suitable replacements, or is unable to attract and retain new personnel with suitable experience as it grows, the Groups business, financial condition, results of operations and prospects may be materially and adversely affected. In addition, business may be lost to competitors which members of senior management may join after leaving their positions with the Group.
Going Concern Basis

The Groups business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman and Interim Chief Executives Review as well as this Chief Financial Officers Report. The financial position of the Group, its cash flows and liquidity position are also described in pages 6 to 8. As highlighted in note 19 to the consolidated annual financial statements, the Group has borrowings and a debt facility which, together with its clients receipts, fund its day to day working capital requirements. Volatile economic conditions may on occasion create uncertainty particularly over (a) the level of demand for the Groups services; (b) exchange rate fluctuations against the US Dollar and the consequent effect on the Groups direct costs; and (c) the availability of bank financing in the foreseeable future. The Groups forecasts and projections, taking into account potential changes in its performance, show that the Group should be able to operate within the level of its capital structure. The Group has held discussions with its bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that these needs may not be met on acceptable terms. The directors believe that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
The Business Review contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
By order of the Board
Uno Makotsvana Chief Financial Officer 18 March 2013
Responsibility Statement
The Directors confirm to the best of their knowledge that the financial statements have been prepared in accordance with International Financial Reporting Standards and give a true and accurate reflection of the Operating result, cash position and Statement of Financial Position at 31 December 2012.
Cautionary Statement
This Business Review, which comprises the Chairman and Interim Chief Executive Officers Statement and Chief Financial Officers Report, has been prepared solely to provide additional information to shareholders to assess the Groups strategies and the potential for those strategies to succeed.
Directors Profiles
Executive Chairman and Interim Chief Executive Officer

Jamie Boyton is Executive Chairman and Interim Chief Executive Officer of the Company and was appointed as a director on 1 January 2009. He is responsible for overseeing the Companys strategic and business development, which includes advising on capital markets requirements and growth opportunities. He was previously an Executive Director and the Head of Asian Equity Syndication and Corporate Broking of Macquarie Securities Limited in Hong Kong from August 2006 to September 2007, where he was responsible for a full range of capital raisings for both private and listed companies across the Asia Pacific region. Prior to this, Jamie was a division director of Macquarie Securities Limited in Hong Kong and a director of ABN AMRO Asia (Hong Kong) between August 2000 and July 2006, where he headed the Hedge Funds Sales for Asia, managing the distribution of a range of Asian financial products into the banks global hedge fund client base. Jamie has a Bachelor of Commerce (Accounting and Finance) degree from the University of Western Australia.
Jamie Phillip Boyton
Jamie Phillip Boyton
Executive Director
Brian Rudd is one of the founders of the Company and had been the Chief Executive Officer of the Group until 31 December 2011 when he relinquished the CEO appointment and remained as an Executive Director to focus on business development, client relations and corporate strategy. He was appointed as a director on 31 May 2005. As one of the founders of the Company, Brian has been instrumental in the successful establishment and development of the Company since 2005. During his time as CEO, the Group has grown into a substantial business with operations in 10 countries across three continents. Brian has over 28 years of experience in the mining industry in both Australia and Africa. Before establishing the Company, Brian was the operations manager and subsequently, the general manager of Stanley Mining Services (Tanzania) Ltd, a subsidiary of Layne Christensen Co., in East Africa.
Brian Rudd
Brian Rudd
Senior Independent Non-Executive Director

Tim Read is the Senior Independent Non-Executive Director and was appointed on 28 May 2010. He has over 40 years experience in the natural resources sector. Tim was president and CEO of Adastra Minerals Inc (TSX and AIM) for 7 years, until its takeover by First Quantum in 2006, where he focused on the strategic direction and operational management of this African junior mining company. Prior to this, Tim was global co-head of mining investment banking at Merrill Lynch where he acted for a number of clients including Anglo American, Placer Dome, Billiton, CVRD, Jiang Xi Copper and Energy Africa. He joined Merrill Lynch in 1995 on its takeover of Smith New Court, where he had acted latterly as a director in the corporate finance department (from 1991) and previously as head of mining stock-broking (from 1988). Prior to this, Tim had many years experience in mining investment analysis for several leading firms of stockbrokers. Tim is now a non-executive director for two other listed minerals companies including Faroe Petroleum plc (AIM) and Metminco Limited (ASX and AIM). He had previously served on the boards of Cumerio SA and Kopane Diamond Developments plc (as Chairman) and Nevoro Inc (as Chairman). Tim also acts as a consultant to a number of minerals companies. He has a BA (Honours) in Economics, is a Fellow of the Chartered Institute of Securities and Investment and a member of the Audit Committee Institute.
Timothy Philip Read
Timothy Philip Read
10
Directors Profiles
Independent Non-Executive Director
Alexander John Davidson
Alexander John Davidson
Alex Davidson is an Independent Non-Executive Director and was appointed on 28 May 2010. He has over 30 years experience in designing, implementing and managing gold and base metal exploration and acquisition programmes throughout the world. Alex was Executive Vice President, Exploration and Corporate Development at Barrick Gold with responsibility for its international exploration programmes and corporate development activities. Prior to joining Barrick Gold, Alex was Vice President, Exploration for Metall Mining Corporation. In April 2005, he was presented the 2005 A.O. Dufresne Award by the Canadian Institute of Mining, Metallurgy and Petroleum. In 2003, he was named the Prospector of the Year by the Prospectors and Developers Association of Canada. Alex is a director of a number of London and Toronto listed companies, including Yamana Gold and US Silver and Gold. He received his B.Sc. and his M.Sc. in Economic Geology from McGill University.
Non-Executive Director
Craig Ian Burton
Craig Burton is a Non-Executive Director of the Company and was appointed on 1 January 2009. He is an experienced and active investor in start-up projects and businesses, both publicly listed and private. Over the last 20 years, he has co-founded numerous development companies, with a focus on the resources, oil and gas, and mining services sectors. He cofounded two ASX 200 companies, Mirabela Nickel Ltd and Panoramic Resources Ltd. He has a Bachelor of Laws and Jurisprudence degree from the University of Western Australia and a Diploma in Financial Markets. He is currently a member of the Australian Institute of Company Directors.
Craig Ian Burton
11
EXECUTIVE COMMITTEE MEMBERS
Jamie Boyton Executive Chairman and Interim Chief Executive Officer
Brian Rudd Director, Business Development
David Payne Chief Commercial Officer Bill Schuts General Manager, Group Operations
Jamie Armitage Group Manager, Supply Chain Logistics
Uno Makotsvana Chief Financial Officer
Tony Woolfe Group Asset Manager
Andrew Triggs Group Manager, International
Our Global Footprint
Current Operations Regional Offices Registered Offices/Previous Operations
12
Financial Content
14 20 23 24 26 27 28 29 30 Corporate Governance Statement Directors Remunera on Report Directors Responsibili es Report of the Independent Auditors Statement of Comprehensive Income Statements of Financial Posi on Statements of Changes in Equity Statements of Cash Flows Notes to the Annual Financial Statements
Glossary
ARPOR EBIT EBITDA HSSE KPI LTI NPAT YOY Average Revenue Per Opera ng Rig Earnings Before Interest and Taxes Earnings Before Interest, Taxes, Deprecia on and Amor sa on Health, Safety, Social and Environment Key Performance Indicator Lost Time Injury Net Prot A er Tax Year On Year
Corporate Governance Statement

Capital Drilling recognises the value and importance of high standards of corporate governance and has put in place a framework appropriate for a smaller quoted company to ensure that such standards are met. The Company is subject to the UK Corporate Governance Code which was issued in June 2010 by the Financial Repor ng Council (the Code), the Company falls outside the FTSE 350 Share Index and is considered a smaller quoted company. This section of our annual report sets out how the Company has applied the Code in 2012. The Code is available at www.frc.org.uk. Details of the Companys corporate governance policies and procedures (including the terms of reference of each of its corporate governance commi ees) can be found on the governance page of the Companys website at www.capdrill.com.
Statement of compliance with the Code

During the year ended 31 December 2012, the Company has been in compliance with the Code except as explained below. The Code recommends that at least half the board, excluding the Chairman, should comprise independent non-execu ve directors. The Code recommends that for smaller quoted companies the board should have at least two independent non-execu ve directors. The Board considers that Alex Davidson and Tim Read are independent, and so the Company sa ses the requirements of the Code for smaller quoted companies. The Board does not consider Craig Burton to be independent because of his historic es and his signicant shareholding in the Company. The Code also recommends that the Chairman of the Board should be independent. The directors do not consider Jamie Boyton to be independent because of his historic es with the Company, his employment with the Company as Execu ve Chairman and Interim Chief Execu ve Ocer and his signicant shareholding in the Company and therefore the Company will not sa sfy this requirement of the Code. However, in view of his knowledge of the Company and specic strategic role within the Company, the Board considers it appropriate at this stage, to maintain Jamie Boyton as Chairman. In addi on, the Company has appointed a senior independent director (as described below) to be available to address any queries or concerns from shareholders. The Code also recommends that the Board should appoint one of its independent non-execu ve directors to be the senior independent director. The senior independent director should be available to shareholders if they have concerns that contact through the normal channels of chairman, chief execu ve ocer or chief nancial ocer has failed to resolve or for which such contact is inappropriate. The Companys senior independent director is Tim Read. In accordance with the Code, the Company has established guidelines requiring specic ma ers to be subject to a decision by a majority of the full Board including material acquisi ons and disposals, investments and capital projects. The Code recommends that a UK listed company should establish an audit commi ee, a remunera on commi ee and a nomina ons commi ee. The Company has each of these commi ees, the terms of reference of which are described in further detail below. In view of the Companys commitment to health and safety and its desire to minimise the environmental impact of the business, the Board has also established a Health, Safety, Social and Environmental Commi ee (HSSE) , details of which are set out below.
Board of directors
The Board comprises: Execu ve Directors: Jamie Boyton Execu ve Chairman and interim Chief Execu ve Ocer (ac ng as interim Chief Execu ve un l a permanent Chief Execu ve has been found) Brian Rudd Execu ve Director David Payne Former Chief Financial Ocer, re red on 26 April 2012 Geo Fardell Former Chief Execu ve Ocer, re red on 19 November 2012 Non-Execu ve Directors: Tim Read Senior Independent Director Alex Davidson Independent Director Craig Burton Non-Independent Director The execu ve and non-execu ve directors are sa sed that the Company operates an eec ve board which is collec vely responsible for the success of the Company. Together, the execu ve and non-execu ve directors bring a broad range of business, commercial and other relevant experience to the Board, which is vital to the management of an expanding company. (Page 10 to 11 contains descrip ons of the background of each director). 14
CAPITAL DRILLING LIMITED ANNUAL REPORT 2012

The terms and condi ons of appointment of the non-execu ve directors are available for inspec on at the Companys registered oce and will also be available at the Annual General Mee ng (AGM). Brief details of these terms and condi ons are also set out in the Directors Remunera on Report. The Board is sa sed that each of the non-execu ve directors commi ed sucient me during 2012 for the fullment of their du es as directors of the Company. None of the non-execu ve directors have any conict of interest which has not been disclosed to the Board. The number of Board and Commi ee mee ngs eligible for a endance and a ended by each of the directors during the year was as follows: Audit and Risk Commi ee mee ngs* 3 3 3 3 Remunera on Commi ee mee ngs* 2 2 2 2 Nomina on Commi ee mee ngs* 2 2 2 2 HSSE Commi ee mee ngs* 2 2 2
Number of mee ngs held in period Jamie Boyton Brian Rudd David Payne^ Geo Fardell^ Tim Read Alex Davidson Craig Burton
* - include mee ngs held in February 2013 ^ - mee ngs a ended prior to re rement
Board mee ngs* 6 6 6 1 5 6 6 6
On appointment, and throughout their tenure, directors receive appropriate training and regular presenta ons are made to the Board by senior management and external advisers. All directors are authorised to obtain, at the Companys expense and subject to the Execu ve Chairmans approval, independent legal or other professional advice where they consider it necessary. All directors have access to the Company Secretary, who oversees their ongoing training and development needs.
Elec on and re-elec on of directors

The Companys Bye-Laws contains detailed rules for the appointment and re rement of directors. There is a formal procedure in place to select and appointment new directors to the Board. These directors are required to re re at the next AGM, but can oer themselves for re-elec on by shareholders. All directors are required to submit themselves for re-elec on at intervals not exceeding three years. During the year, both Mr David Payne, Former Chief Financial Ocer and Mr Geo Fardell, Former Chief Execu ve Ocer re red from the Board. The Board annually evaluates the performance of individual directors, the Board as a whole and its Commi ees. The evalua on comprises structured interviews led by the Execu ve Chairman and the Senior Independent Director with the other directors. The performance of the execu ve and non-execu ve directors was appraised by the Execu ve Chairman, taking into account the views of the other directors. Led by the Senior Independent Director, the performance of the Execu ve Chairman was assessed by the non-execu ve directors, taking into account the views of the other execu ve directors.
Opera on of the Board

The Board meets regularly and 6 mee ngs (including the Board mee ng held in February 2013) were held in 2012. All directors are supplied, in advance of mee ngs, with appropriate informa on covering ma ers which are to be considered. The Execu ve Chairman also met with the non-execu ve directors in the absence of the other execu ve directors. There is a formal schedule of decisions reserved for the Board. This includes approval of the following: the Groups strategy; the annual opera ng plan and budget; the annual and interim nancial statements; signicant transac ons; major capital expenditures; risk management policies; the authority levels vested in management; Board appointments; and remunera on policies. As described below, the review of certain ma ers is delegated to Board Commi ees, which make recommenda ons to the Board in rela on to those ma ers reserved for the Board as a whole.
15

Audit and Risk Commi ee
The Audit and Risk Commi ee comprises Tim Read (chairman), Alex Davidson and Craig Burton. The proles of the Audit and Risk Commi ee members are on page 10 to 11 and are considered to have recent and relevant nancial experience. The Commi ee met three mes in 2012 and had met the external auditors separately on all three occasions. The Commi ee may, from me to me, invite the Companys Chief Execu ve Ocer and Chief Financial Ocer to a end its mee ngs. The Code recommends that smaller quoted companies have two independent non-execu ve directors appointed to the Audit and Risk Commi ee. Tim Read and Alex Davidson are independent non-execu ve directors and therefore the Company complies with the Code for smaller quoted companies. The Audit and Risk Commi ee is primarily concerned with the eec veness of the Companys accoun ng policies and prac ces, nancial repor ng and internal controls. It is among other things responsible for: (i) monitoring the integrity of nancial statements, including reviewing the nancial statements and signicant nancial returns to regulators and any formal announcements rela ng to the Companys nancial performance; reviewing the integrity of internal nancial control and risk management systems and codes of corporate conduct and ethics; making recommenda ons to the Board regarding the engagement of independent auditors; reviewing the plan, scope and results of the annual audit, the independent auditors letter of comments and managements response thereto; reviewing and approving the internal audit plan and managements response to the internal audit; receiving reports from internal audit and others rela ng to risk control; approving all audit and non-audit services; reviewing policies and procedures with respect to internal accoun ng and nancial controls; and reviewing any changes in accoun ng policy.
(ii)
(iii) (iv)
(v) (vi) (vii) (viii) (ix)
In 2012, the Audit and Risk Commi ee: (i) reviewed the 2012 half-year report and the 2012 annual report and nancial statements, in advance of their considera on by the Board, and considered the appropriateness and consistency of applica on of accoun ng policies adopted in their prepara on and the basis of any major judgements and es mates. As part of this review, the Audit and Risk Commi ee received a report from the external auditors on their review of the 2012 interim nancial statements and their audit of the 2012 annual nancial statements; reviewed proposed changes to the Groups internal controls; received a report from the external auditors on, and considered the eec veness of, the Groups accoun ng and internal control systems and monitored the ac ons taken by management in response; considered and agreed the scope of the review to be undertaken by the external auditors on the 2012 half-year report and 2012 annual report; agreed the fees to be paid to the external auditors for the review of the 2012 interim nancial statements and for the audit of the 2012 annual nancial statements; received updates from the auditors on new accoun ng pronouncements, regula on and best prac ce; and reviewed its own eec veness.
(ii) (iii)
(iv)
(v)
(vi) (vii)
16

The chairman of the Audit and Risk Commi ee reported to the Board on its ac vi es a er each mee ng, iden fying relevant ma ers requiring communica on to the Board and recommenda ons on the steps to be taken. External auditors The Audit and Risk Commi ee is responsible for making recommenda ons to the Board, to be put to shareholders at the Annual General Mee ng, in rela on to the appointment, re-appointment and removal of the external auditors, as well as for the approval of their remunera on and their terms of engagement. The Commi ee has considered the independence of the external auditors and is sa sed that independence has been maintained. Following considera on and sa sfac on of the performance of the Companys auditors, the Audit and Risk Commi ee has recommended to the Board that the external auditors be re-appointed. The Audit and Risk Commi ee also pre-approves any material permi ed non-audit engagements with the Group auditors. Regular reports were presented on the fees paid to the external auditors in order to ensure that the rela onship between non-audit fees and audit fees was not inappropriate. Details of remunera on paid to the Auditors are included in Note 25 of the annual nancial statements. The Audit and Risk Commi ee reviewed the external audit plan proposed by the auditors and par cipated in the review of the quality of the service that they provided. It has also met privately with the external auditors during the year without senior execu ve management being present. Internal auditors The Company did not have a formal internal audit func on for the nancial year under review. For the nancial year under review, the Audit and Risk Commi ee, having considered the size, complexity of the opera ons as well as the exis ng internal control environment, has not recommended the need for an internal audit func on. The Company intends to establish an internal audit func on and is seeking a suitable candidate to assume this role.
Remunera on Commi ee
The Remunera on Commi ee comprises Craig Burton (chairman), Tim Read and Alex Davidson. In respect of smaller quoted companies, the Code recommends that a companys remunera on commi ee has at least two independent non-execu ve directors appointed. Tim Read and Alex Davidson are independent directors and therefore the Company complies with the Code for smaller quoted companies. The Remunera on Commi ee sets the remunera on packages for the directors, including basic salary, bonuses and other incen vised compensa on payments and awards. It ra es policy and framework proposals made by the execu ve directors in respect of the remunera on for senior execu ves within the Group. The Remunera on Commi ee also approves the grant of op ons under the 2010 Discre onary Share Op on Plans. The Remunera on Commi ee is assisted by the Company Secretary and takes advice as appropriate from external advisers. The Remunera on report is set out on pages 20 to 22.
Nomina on Commi ee
The Nomina on Commi ee comprises Craig Burton (chairman), Tim Read and Alex Davidson. The Code recommends that the majority of members of the nomina on commi ee should be independent non-execu ve directors. Tim Read and Alex Davidson are independent non-execu ve directors and therefore the Company complies with the Code for smaller quoted companies. The Code also recommends that the Chairman or an independent non-execu ve director chairs the nomina on commi ee. Craig Burton, who is not considered independent, is chairman and so the Company does not meet the requirements of the Code in this respect. However, in view of his experience and knowledge of the industry sector and the Company, the Board considers it appropriate for Craig Burton to be a member and chairman of the Nomina on Commi ee. The Nomina on Commi ee deals with appointments to the Board, monitors poten al conicts of interest and reviews annually the independence of the non-execu ve directors. The Nomina on Commi ee is also responsible for proposing candidates for appointment to the Board having regard to the balance and structure of the Board. The Nomina on Commi ee also con nues to look to iden fy further non-execu ve directors for appointment with the help of external search consultants to bring the composi on of the Board in compliance with the Code. An independent and interna onal execu ve search rm has been appointed to assist in the recruitment of a permanent chief execu ve ocer since Mr Geo Fardell had stepped down from his role as chief execu ve ocer and Mr Jamie Boyton is currently ac ng as interim chief execu ve ocer.
17

Health, Safety, Social and Environment Commi ee (the HSSE Commi ee)
The Health, Safety, Social and Environment (the HSSE Commi ee) comprises of Alex Davidson (chairman), Brian Rudd and Wayne Healey (General Manager Capital Support Services). The HSSE Commi ee is responsible for formula ng and recommending to the Board a policy on health, safety, social and environmental issues related to the Groups opera ons. In par cular, the HSSE Commi ee focuses on compliance with applicable standards to ensure that an eec ve system of health, safety, social and environmental standards, procedures and prac ces is in place at each of the Groups opera ons. The HSSE Commi ee is also responsible for reviewing managements inves ga on of incidents or accidents that occur, to assess whether policy improvements are required. While the HSSE Commi ee is expected to make recommenda ons, the ul mate responsibility for establishing the Groups health, safety, social and environmental policies remain with the Board. The terms of reference of the HSSE Commi ee are available on the Companys website at www.capdrill.com.
Internal Controls
The Company has complied with the Codes provisions on internal control having established the procedures necessary to implement the guidance issued in October 2005 (formerly known as the Turnbull Guidance) and by repor ng in accordance with that guidance. Maintaining a sound system of internal control The Board conducts a periodic review of the eec veness of the Groups system of internal controls. The Boards assessment includes a review of the major nancial and non-nancial risks to the business and the corresponding internal controls. Where weaknesses or opportuni es for improvement are iden ed, clear ac on plans are put in place and implementa on is monitored by senior management and the execu ve directors. In instances where the Group is se ng up opera ons in a new country or a new region, appropriate personnel are deployed or recruited and training is conducted to facilitate the integra on with Group opera onal and nancial policies. In addi on, there are clear lines of responsibili es for key risk areas such as acquisi ons, capital expenditure, compliance, informa on technology and opera ons. These lines of responsibili es are con nuously monitored by the execu ve directors to ensure that the Groups strategic risk management principles are met. Reviewing the eec veness of internal control The Board has overall responsibility for the Companys system of internal control and reviewing its eec veness. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objec ves. In pursuing these objec ves, internal controls can only provide reasonable and not absolute assurance against material misstatement or loss. In addi on to the process of assessment of internal control and the monitoring of the eec veness of internal nancial control by the Audit and Risk Commi ee, the process used by the Board to review the eec veness of the system of internal control can be summarised as follows: (i) Control environment The Board is commi ed to maintaining a control-conscious culture across the Group whilst allowing the business streams sucient autonomy to manage and develop their businesses. This is communicated to employees by way of regular management mee ngs and dissemina on of updated Group policies. Monthly commercial mee ngs are also held between the corporate headquarters in Singapore and the respec ve country managers where weaknesses in internal controls are iden ed and clear ac on plans are drawn up. (ii) Financial repor ng There is a comprehensive system of nancial repor ng to the Board including comparison to an annual budget prepared in line with the Groups strategic plan and formally adopted by the Board, rolling forecasts and monthly repor ng of nancial and opera ng results. Key performance indicators are con nuously monitored by senior management and execu ve directors.
18

(iii) Group procedures manual Responsibility levels are communicated throughout the Group as part of the Group procedures manual, which sets out delega on of authority, authorisa on levels and other control procedures, together with accoun ng and repor ng procedures. The manual is updated periodically to take into account changes in the accoun ng standards, repor ng requirements and opera onal procedures. Senior management is also provided with training and guidance, where necessary, to ensure that the current and future needs of the Group are met.
Share dealing policy

The Company has a share dealing policy, which imposes dealing obliga ons at least as rigorous as those required by the Model Code of the London Stock Exchange Lis ng Rules. The share dealing policy applies to the directors, persons discharging managerial responsibili es (PDMR) iden ed by the Board and other relevant insider employees of the Group, and their respec ve connected persons. All employees under the share dealing policy are restricted from dealing in the Companys shares during close periods or if they are in possession of inside informa on.
Shareholder rela ons

The Execu ve Chairman, Chief Execu ve Ocer and the Chief Financial Ocer are the Groups principal spokesmen with investors, analysts, fund managers, the press and other interested par es. Access is available to the Senior Independent Director and other non-execu ve directors if required. The Board is kept informed about shareholder rela ons and in par cular the Senior Independent Director is kept informed of the views of major shareholders. This is done by a combina on of reports to the Board on mee ngs held and feedback to the Board from the Groups advisers. The Group holds brieng mee ngs with analysts and ins tu onal shareholders, usually following the half year and nal results announcements, to ensure that the inves ng community receives a balanced and complete view of the Groups performance and the issues faced by the business. The Group provides nancial statements to all shareholders twice a year when its half year and full year results are announced and provides interim management statements as required. These results and all other stock exchange announcement informa on are available on the Groups website www.capdrill.com. Management presenta ons as well as other informa on relevant to investors are also available on the website. All shareholders are given at least 21 days no ce of the AGM. It is standard prac ce for all directors to a end the AGM to which all shareholders are invited and at which they may raise ques ons to the chairmen of the various commi ees or the Board generally. The proxy votes for and against each resolu on, as well as absten ons (which may be recorded on the proxy form accompanying the no ce of AGM) are counted before the AGM commences and are made available to shareholders at the close of the formal business of the mee ng. The proxy votes are announced through the stock exchange and posted on the Companys website shortly a er the close of the mee ng.
19
Directors Remunera on Report

The Remunera on Commi ee
The Remunera on Commi ee comprises Craig Burton (chairman), Tim Read and Alex Davidson. The Remunera on Commi ee reviews and determines, on behalf of the Board, the salary and benets packages of the Execu ve Chairman and the other execu ve directors. The Remunera on Commi ee also considers and approves all awards made by the Company to employees under the 2010 Discre onary Share Op on Plans. Fees for the non-execu ve directors are based on their le ers of appointment entered into with the Company and reviewed annually by the Board. In determining the execu ve directors remunera on for the year, the Remunera on Commi ee consulted the Execu ve Chairman and/or Chief Execu ve Ocer as appropriate, save in rela on to his own remunera on. No director is involved in deciding his own remunera on. In deciding the execu ve directors remunera on, the Remunera on Commi ee draws on its members experience and knowledge of the industry sector of the Company and also makes use of published reports on directors remunera on packages within the same industry, taking into account the size and complexity of the business. The Remunera on Commi ee also has access to advice from independent external advisers where necessary.
Remunera on policy
Compensa on packages for execu ve directors are based on their service agreements entered into with the Company. The package for each execu ve director currently comprises an annual salary. In addi on, each execu ve director was also issued with share op ons under the 2010 Discre onary Share Op on Plan. Other than as disclosed below, the execu ve directors did not receive any other remunera on. In reviewing and se ng compensa on packages for execu ve directors, the Remunera on Commi ee takes into account a wide range of factors, including the Groups nancial performance, market trends and prac ces, and individual contribu ons across a range of performance measures, such as health and safety standards, training standards and reducing any nega ve environmental and social impact of the business.
Annual salary
The Remunera on Commi ees policy is to set the annual salaries of each execu ve director at levels that reect their roles, experience and the prac ces in the employment market whilst ensuring that they are in line with the pay and employment condi ons of other employees within their business units. The remunera on of the execu ve directors was as follows: Salary 2012 US$000 Execu ve chairman Jamie Boyton Execu ve director Brian Rudd Geo Fardell(1) David Payne(2)
(1) (2)
Salary 2011 US$000 361
412
420 629 120
402 341
includes separa on payment of US$257,300 for the period from January 2012 to April 2012
20

Share Op on
The 2010 Discre onary Share Op on Plan The 2010 Discre onary Share Op on Plan was approved by shareholders on 28 May 2010 and will expire on 6 June 2020 or on such earlier date as the Remunera on Commi ee may at any me determine. It is designed to mo vate directors and senior employees, whilst retaining them in the Companys employment, by gran ng op ons to acquire shares in the Company. The Remunera on Commi ee regularly considers when and to whom awards should be granted having regard to the importance of retaining and mo va ng key employees who make a material contribu on to the business. The Remunera on Commi ee does not believe that the share incen ve structure raises any environmental, social and governance risks. Under the rules of the 2010 Discre onary Share Op on Plan, an employee may not receive op ons in any nancial year such that the aggregate market value of the Companys shares comprised in the op ons exceeds 200% of his annual salary. At 31 December 2012, the share op ons that had been awarded to each director were as follows: At 1 January 2012 Execu ve chairman Jamie Boyton At 31 December 2012
Granted
Lapsed/ cancelled Exercised
Exercise price
Date from which exercisable
Expiry date
150,000 150,000 150,000
150,000 150,000 150,000
0.80 0.80 0.80
1 January 2012 1 January 2013 1 January 2014
31 December 2014 31 December 2014 31 December 2014
Execu ve directors Brian Rudd
150,000 150,000 150,000 150,000 150,000 150,000
150,000 150,000 150,000 150,000 150,000 150,000
0.80 0.80 0.80 0.80 0.80 0.80 1.02
1 January 2012 1 January 2013 1 January 2014 1 January 2012 1 January 2013 1 January 2014 16 January 2012
31 December 2014 31 December 2014 31 December 2014 31 December 2014 31 December 2014 31 December 2014 15 January 2016
David Payne*
Geo Fardell Nonexecu ve directors Alex Davidson Tim Read Craig Burton
3,000,000 (3,000,000)
* re red as execu ve director on 26 April 2012.
21

Service contracts
The execu ve directors service contracts have no specied term. No director has a service contract containing more than a six month no ce period or with pre-determined compensa on provisions upon termina on exceeding six months salary and benets. It is the Companys policy that, except where prescribed by law, there should be no automa c en tlement to bonuses in the event of an early termina on.
External appointments
The Company recognises that execu ve directors may be invited to become non-execu ve directors of other companies and that such appointments can broaden their knowledge and experience to the benet of the Company. They are en tled to retain any fees earned. Mr Jamie Boyton holds directorships of Sahar Minerals Ltd and Cannon Investment Management. Mr Brian Rudd holds directorship of Sahar Minerals Ltd. None of the other current execu ve directors held non-execu ve directorships for which they were remunerated.
Non-execu ve directors
Non-execu ve directors are appointed ini ally un l the rst AGM of the Company following appointment, when they are required to stand for re-elec on and, subject to their re-elec on, therea er for three years before standing again for re-elec on. The non-execu ve directors entered into le ers of appointment with the Company on 28 May 2010 for an ini al period of three years commencing, therea er renewable on the agreement of both the Company and the director. The le ers of appointment, revised subsequently on 16 March 2012, specify the following termina on no ce periods and fees: Noce Period Alex Davidson Tim Read Craig Burton 3 months 3 months 3 months Annual Fee / US$ 80,000 90,000 80,000
The annual fees of the non-execu ve directors were as follow: Fees 2012 US$000 Non-execu ve directors Alex Davidson Tim Read Craig Burton 80 90 80 65 83 65 80 90 80 65 83 65 Fees 2011 US$000 Total 2012 US$000 Total 2011 US$000
Other than as disclosed above, the non-execu ve directors did not receive any other remunera on, from the Company or any of the subsidiaries.
Approval
This report was approved by the Board of Directors on 18 March 2013 and signed on its behalf by:
Craig Burton
Remunera on Commi ee Chairman
22
Directors Responsibili es
The directors are responsible for preparing this Annual Report, directors remunera on report and the nancial statements in accordance with applicable law and regula ons. The directors are required to prepare group nancial statements for each nancial year giving a true and fair view of the Groups state of aairs at the end of the year and prot or loss for the year, in accordance with Interna onal Financial Repor ng Standards (IFRSs) as issued by the Interna onal Accoun ng Standards Board. The directors have also chosen to prepare the parent company nancial statements under IFRSs. The directors must not approve the accounts unless they are sa sed that they give a true and fair view of the state of aairs of the company and of the prot or loss of the Company for that period. In preparing these nancial statements Interna onal Accoun ng Standard 1 Presenta on of Financial Statements requires the directors to:

properly select and apply accoun ng policies; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable informa on; provide addi onal disclosures when compliance with the specic requirements in IFRSs are insucient to enable users to understand the impact of par cular transac ons, other events and condi ons on the en tys nancial posi on and nancial performance; and make an assessment of the Groups ability to con nue as a going concern.
The directors are responsible for keeping adequate accoun ng records that are sucient to show and explain the Groups transac ons and disclose with reasonable accuracy at any me the nancial posi on of the Group. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the preven on and detec on of fraud and other irregulari es. The directors are responsible for the maintenance and integrity of the corporate and nancial informa on included on the Companys website.
Directors responsibility statement

We conrm to the best of our knowledge: 1. the nancial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabili es, nancial posi on and prot or loss of Capital Drilling Limited and the undertakings included in the consolida on taken as a whole; and the management report, which is incorporated into the Chief Execu ve Review and the Chief Financial Ocers Report, includes a fair review of the development and performance of the business and the posi on of Capital Drilling Limited and the undertakings included in the consolida on taken as a whole, together with a descrip on of the principal risks and uncertain es that they face.
2.
By order of the Board
Execu ve Chairman Jamie Boyton 18 March 2013
Execu ve Director Brian Rudd
23
Report of the Independent Auditors

To the Members of Capital Drilling Limited
We have audited the annual nancial statements of Capital Drilling Limited (the Company) and subsidiaries (collec vely, the Group), which comprise the consolidated and separate statements of nancial posi on as at 31 December 2012, the consolidated and separate statements of comprehensive income, the consolidated and separate statements of changes in equity and the consolidated and separate statements of cash ows for the year then ended, and a summary of signicant accoun ng policies and other explanatory notes as set out on pages 26 to 62. The nancial repor ng framework that has been applied in their prepara on is applicable law and Interna onal Financial Repor ng Standards as issued by the Interna onal Accoun ng Standards Board. This report is made solely to the Companys members, as a body. Our audit work has been undertaken so that we might state to the Companys members those ma ers we are required to state to them in an auditors report and for no other purpose. To the fullest extent permi ed by law, we do not accept or assume responsibility to anyone other than the Company and the Companys members as a body, for our audit work, for this report, or for the opinions we have formed.
Respec ve responsibili es of directors and auditor As explained more fully in the Directors Responsibili es Statement, the directors are responsible for the prepara on of the nancial statements and for being sa sed that they give a true and fair view. Our responsibility is to audit and express an opinion on the nancial statements in accordance with applicable laws and Interna onal Standards on Audi ng as issued by the Interna onal Audi ng and Assurance Standards Board. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the nancial statements are free from material misstatement.
Scope of the audit of the nancial statements An audit involves obtaining evidence about the amounts and disclosures in the nancial statements sucient to give reasonable assurance that the nancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accoun ng policies are appropriate to the companys circumstances and have been consistently applied and adequately disclosed; the reasonableness of signicant accoun ng es mates made by the directors; and the overall presenta on of the nancial statements. In addi on, we read all nancial and non-nancial informa on in the annual report to iden fy material inconsistencies with the audited nancial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implica ons for our report.
Opinion on nancial statements In our opinion the nancial statements:
give a true and fair view of the state of the Group and Companys aairs as at 31 December 2012 and of its prot for the year then ended; and have been properly prepared in accordance with Interna onal Financial Repor ng Standards as issued by the Interna onal Accoun ng Standards Board.
24
Report of the Independent Auditors

To the Members of Capital Drilling Limited
Ma ers on which we are required to report by excep on We have nothing to report in respect of the following ma ers: Under the Lis ng Rules of the London Stock Exchange, we are required to review:

the directors statement contained within the business review in rela on to going concern; and the part of the Corporate Governance Statement rela ng to the Companys compliance with the nine provisions of the UK Corporate Governance Code specied for our review; and
certain elements of the report to the shareholders by the Board on directors remunera on.
Deloi e & Touche Per A.W. Brown Partner 18 March 2013

Na onal Execu ve: LL Bam Chief Execu ve AE Swiegers Chief Opera ng Ocer GM Pinnock Audit DL Kennedy Risk Advisory NB Kader Tax TP Pillay Consul ng K Black Clients & Industries JK Mazzocco Talent & Transforma on CR Beukman Finance M Jordan Strategy S Gwala Special Projects TJ Brown Chairman of the Board MJ Comber Deputy Chairman of the Board A full list of partners and directors is available on request. B-BBEE ra ng : Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code Member of Deloi e Touche Tohmatsu Limited
25
Statement of Comprehensive Income

for the nancial year ended 31 December 2012
Group Note 2012 $ Revenue Cost of sales Gross prot Other income Administra on expenses Deprecia on Prot (loss) from opera ons Finance charges Prot (loss) before tax Taxa on Prot (loss) for the year Other comprehensive income: Exchange dierences on transla on of foreign opera ons Total comprehensive income (loss) for the year Earnings per share: Basic (cents per share) Diluted (cents per share) 8 8 10.5 10.5 13.1 13.0 (11,719) 14,099,152 7,444 17,596,056 (14,659,924) (3,110,471) 7 5 6 4 158,886,956 (105,930,444) 52,956,512 1,101 (15,852,599) (16,155,444) 20,949,570 (2,023,986) 18,925,584 (4,814,713) 14,110,871 2011 $ 130,464,797 (85,225,297) 45,239,500 11,865 (11,228,455) (11,175,099) 22,847,811 (1,104,611) 21,743,200 (4,154,588) 17,588,612 2012 $ 10,848,799 (7,637,889) 3,210,910 (12,882,098) (4,090,165) (13,761,353) (12,977) (13,774,330) (885,594) (14,659,924) Company 2011 $ 7,405,662 (6,167,927) 1,237,735 5,558,194 (5,998,920) (3,459,956) (2,662,947) (2,662,947) (447,524) (3,110,471)
26
Statements of Financial Posi on

Group Note 2012 $ ASSETS Non-current assets Property, plant and equipment Investment in subsidiaries Deferred taxa on Total non-current assets Current assets Inventory Trade and other receivables Prepaid expenses and other assets Taxa on Aliate accounts receivable Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Share capital Share premium Equity-se led employee benets reserve Foreign currency transla on reserve Retained earnings (Accumulated loss) Total equity Non-current liabili es Long-term liabili es Deferred taxa on Total non-current liabili es Current liabili es Trade and other payables Taxa on Aliate accounts payable Current por on of long-term liabili es Bank overdra Total current liabili es Total equity and liabili es 2011 $ 2012 $ Company 2011 $
10 11 12
74,043,755 79,867 74,123,622
61,497,698 56,231 61,553,929
22,113,462 1,071,483 23,184,945
27,541,414 1,070,373 28,611,787
13 14
15 16
22,605,119 25,970,607 8,090,422 1,010,650 9,063,606 66,740,404 140,864,026
20,417,421 20,205,997 7,902,037 367,508 7,716,453 56,609,416 118,163,345
394,193 1,068,752 2,077,116 21,808,793 1,407,248 26,756,102 49,941,047
1,504,124 646,740 3,360,335 12,355 15,677,715 1,111,811 22,313,080 50,924,867
17 17 18
13,459 21,561,190 184,171 (36,748) 71,521,155 93,243,227
13,459 21,561,190 132,225 (25,029) 57,410,284 79,092,129
13,459 21,561,190 184,171 (25,784,904) (4,026,084)
13,459 21,561,190 132,225 (11,124,980) 10,581,894
19 12
28,164,341 1,599,129 29,763,470
7,968,828 1,033,567 9,002,395
20 21 22 19 16
16,246,045 724,765 886,519 17,857,329 140,864,026
14,498,360 1,178,722 10,720,099 3,671,640 30,068,821 118,163,345
959,376 53,007,755 53,967,131 49,941,047
1,121,446 39,221,527 40,342,973 50,924,867
27
Statements of Changes in Equity

Equityse led employee benets reserve $ Foreign currency transla on reserve $
Share capital $ GROUP Balance at 31 December 2010 Recogni on of share-based payments Total comprehensive income for the year Balance at 31 December 2011 Recogni on of share-based payments Total comprehensive income for the year Balance at 31 December 2012
Share premium $
Retained earnings $
Total $
13,459 13,459 13,459
21,561,190 21,561,190 21,561,190
5,925 126,300 132,225 51,946 184,171
(32,473) 7,444 (25,029) (11,719) (36,748) Equityse led employee benets reserve $
39,821,672 17,588,612 57,410,284 14,110,871 71,521,155
61,369,773 126,300 17,596,056 79,092,129 51,946 14,099,152 93,243,227
Share capital $ COMPANY Balance at 31 December 2010 Recogni on of share-based payments Total comprehensive loss for the year Balance at 31 December 2011 Recogni on of share-based payments Total comprehensive loss for the year Balance at 31 December 2012 13,459 13,459 13,459
Share premium $
Accumulated loss $
Total $
21,561,190 21,561,190 21,561,190
5,925 126,300 132,225 51,946 184,171
(8,014,509) (3,110,471) (11,124,980) (14,659,924) (25,784,904)
13,566,065 126,300 (3,110,471) 10,581,894 51,946 (14,659,924) (4,026,084)
28
Statements of Cash Flows

Group Note 2012 $ Opera ng ac vi es: Cash from opera ons Finance charges Taxa on paid Net cash generated from (used in) opera ng ac vi es Inves ng ac vi es: Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash used in inves ng ac vi es Financing ac vi es: Long-term liabili es raised Long-term liabili es repaid Decrease in short-term liabili es Net cash generated from nancing ac vi es Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 2011 $ 2012 $ Company 2011 $
23 24
31,481,476 (2,023,986) (5,369,886) 24,087,604
14,204,899 (1,104,611) (3,043,313) 10,056,975
7,098,906 (12,977) (873,239) 6,212,689
125,277 (594,357) (469,080)
(29,992,492) 561,748 (29,430,744)
(26,706,154) 1,816,171 (24,889,983)
(6,288,488) 371,236 (5,917,253)
(10,170,718) 1,083,348 (9,087,370)
29,200,000 (18,838,067) 10,361,933 5,018,793 4,044,813 9,063,606
6,750,000 (5,721,643) (387,790) 640,567 (14,192,441) 18,237,254 4,044,813
295,437 1,111,811 1,407,248
(9,556,450) 10,668,261 1,111,811
16
29
Notes to the Annual Financial Statements

1. General informa on
Capital Drilling Limited (the Company) is incorporated in Bermuda. The Company and its subsidiaries (the Group) provide drilling services including but not limited to explora on, development, grade control and blast hole drilling services to mineral explora on and mining companies located in emerging and developed markets. The Group also provides procurement and IT services for mining and mining explora on companies. During the year ended 31 December 2012, the Group provided drilling services in Chile, Egypt, Ethiopia, Ghana, Mauritania, Mozambique, Papua New Guinea, Solomon Islands, Tanzania, and Zambia. The Group's administra ve and opera ons oces are located in Singapore and Chile.
2.
Adop on of new and revised standards

2.1 Standards and Interpreta ons adopted with no eect on the nancial statements The following new and revised standards and interpreta ons issued by the Interna onal Accoun ng Standards Board have been adopted in these nancial statements in the current year. Their adop on has not had any signicant impact on the amounts reported in these nancial statements but may aect the accoun ng for future transac ons or arrangements.

IFRS 1 First- me Adop on of Interna onal Financial Repor ng Standards IFRS 7 Financial Instruments: Disclosures IAS 12 Income Taxes
2.2
Standards and Interpreta ons in issue not yet adopted At the date of authorisa on of these nancial statements, other than the standards and interpreta ons adopted above, the following new and revised standards and interpreta ons were issued by the Interna onal Accoun ng Standards Board but were not yet eec ve:

IFRS 1 (Revised 2008) First- me Adop on of Interna onal Financial Repor ng Standards 1 IFRS 7 (as amended by IFRS 9) Financial Instruments: Disclosures 1,3 IFRS 9 Financial Instruments 3 IFRS 10 Consolidated Financial Statements 1,2 IFRS 11 Joint Arrangements 1 IFRS 12 Disclosure of Interests in Other En IFRS 13 Fair Value Measurement 1 IAS 1 (Revised 2007) Presenta on of Financial Statements 1 IAS 16 (Revised 2012) Property, Plant and Equipment 1 IAS 19 (Revised 2011) Employee Benets 1 IAS 27 (Revised 2011) Separate Financial Statements 1,2 IAS 28 Investments in Associates and Joint Ventures 1 IAS 32 (Revised 2012) Financial Instruments: Presenta on 2,3 IAS 34 (Revised 2012) Interim Financial Repor ng 3
1 2 3 Eec ve for annual periods beginning on or a er 1 January 2013 Eec ve for annual periods beginning on or a er 1 January 2014 Eec ve for annual periods beginning on or a er 1 January 2015
es 1,2
The directors an cipate that all the above interpreta ons will be adopted in the Group's nancial statements in the future nancial periods as it becomes eec ve. The adop on of these standards and interpreta ons will have no material impact on the nancial statements of the Group in the period of ini al applica on.
30

3. Summary of signicant accoun ng policies
Basis of prepara on The nancial statements have been prepared on the historical cost basis except for nancial instruments which are measured at fair value. Historical cost is generally based on the fair value of the considera on given in exchange for the assets. The nancial statements have been prepared in accordance with Interna onal Financial Repor ng Standards issued by the Interna onal Accoun ng Standards Board and are presented in United States Dollars since that is the currency in which the majority of the Group's transac ons are denominated. Where addi onal informa on has been presented in the current year nancial statements, the prior year amounts have been re-presented to be consistent with the presenta on in the current year. The principal accoun ng policies adopted are set out below. Going concern The directors have, at the me of approving the nancial statements, a reasonable expecta on that the Company and the Group have adequate resources to con nue in opera onal existence for the foreseeable future. Thus they con nue to adopt the going concern basis of accoun ng in preparing the nancial statements. Basis of consolida on The consolidated nancial statements incorporate the nancial statements of the Company and en es (including special purpose en es) controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the nancial and opera ng policies of an en ty so as to obtain benets from its ac vi es. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the eec ve date of acquisi on and up to the eec ve date of disposal, as appropriate. Where necessary, adjustments are made to the nancial statements of subsidiaries to bring their accoun ng policies in line with those used by other members of the Group. All intra-Group transac ons, balances, income and expenses are eliminated in full on consolida on. Business combina ons The acquisi on of subsidiaries is accounted for using the acquisi on method. The considera on transferred in a business combina on is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabili es incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisi on related costs are generally recognised in prot or loss as incurred. The acquirees iden able assets, liabili es and con ngent liabili es that meet the condi ons for recogni on under IFRS 3 are recognised at their fair values at the acquisi on date, except for deferred tax assets or liabili es recognised in accordance with IAS 12 Income Taxes and non-current assets that are classied as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discon nued Opera ons, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisi on is recognised as an asset and ini ally measured at cost, being the excess of the costs of the business combina on over the Groups interest in the net fair value of the iden able assets, liabili es and con ngent liabili es recognised. If a er reassessment, the Groups interest in the net fair value of the acquirees iden able assets, liabili es and con ngent liabili es exceeds the costs of the business combina on, the excess is recognised immediately in prot or loss.
31

3. Summary of signicant accoun ng policies (con nued)
Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated deprecia on and subsequent impairment losses. Deprecia on is charged so as to write-o the cost of assets, less their residual values, over their expected useful lives using the straight-line basis, on the following basis; Drilling rigs Associated drilling equipment Vehicles and trucks Camp and associated equipment 5 - 12 years 2 - 7 years 4 - 7 years 3 - 5 years
The es mated useful lives, residual values and deprecia on method are reviewed at each repor ng date, with the eect of any changes in es mate accounted for on a prospec ve basis. An item of property, plant and equipment is derecognised upon disposal or when no future economic benets are expected to arise from the con nued use of the asset. The gain or loss arising on disposal or re rement of an item of property, plant and equipment is determined as the dierence between the sales proceeds and the carrying amount of the asset and is recognised in prot or loss. Impairment of tangible assets At each repor ng date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indica on that those assets may be impaired. If any such indica on exists, the recoverable amount of the asset is es mated in order to determine the extent of the impairment loss (if any). When it is not possible to es mate the recoverable amount for an individual asset, the recoverable amount is determined for the cash-genera ng unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the es mated future cash ows are discounted to their present value using a pre-tax discount rate that reects current market assessments of the me value of money and the risks specic to the asset for which the es mates of future cash ows have not been adjusted. If the recoverable amount of an asset (or cash-genera ng unit) is es mated to be less than its carrying amount, the carrying amount of the asset (cash-genera ng unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revalua on decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-genera ng unit) is increased to the revised es mate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-genera ng unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revalua on increase. Provisions Provisions are recognised when the Group has a present obliga on (legal or construc ve) as a result of a past event and it is probable that this will result in an ou low of economic benets that can be reliably es mated. Provisions are measured at the directors best es mate of the expenditure required to se le the obliga on at the repor ng date, and are discounted to present value where the eect is material. Cash and cash equivalents For the purpose of the statement of nancial posi on, cash and cash equivalents comprise cash on hand and deposits held on call with banks with maturi es of three months or less. Bank overdra s are separately disclosed as current liabili es. For the purpose of the cash ow statement, cash and cash equivalents comprise cash on hand and deposits held on call with banks net of bank overdra s.
32

Revenue recogni on Revenue is measured at the fair value of the considera on received or receivable. Revenue is reduced for es mated customer returns, rebates and other similar allowances. Rendering of services Revenue from a contract to provide services is recognised by reference to the stage of comple on of the contract. The stage of comple on of the contract is determined as follows:

revenue from drilling contracts is recognised at the contractual drilling rates as the drilling services are delivered and direct expenses are incurred. revenue from procurement services represent the net revenue earned and is recognised when the services are rendered. revenue from equipment rental is recognised on a straight-line basis over the lease term. revenue from informa on technology services is recognised when the services are rendered.
Dividend and interest income Dividend income from investments is recognised when the shareholder's right to receive payment has been established (provided that it is probable that the economic benets will ow to the Group and the amount of income can be measured reliably). Interest income from a nancial asset is recognised when it is probable that the economic benets will ow to the Group and the amount of income can be measured reliably. Interest income is accrued on a me basis, by reference to the principal outstanding and at the eec ve interest rate applicable, which is the rate that exactly discounts es mated future cash receipts through the expected life of the nancial asset to that asset's net carrying amount on ini al recogni on. Foreign currency The individual nancial statements of each Group Company are presented in the currency of the primary economic environment in which it operates (its func onal currency). For the purpose of the consolidated nancial statements, the results and nancial posi on of each Group Company are expressed in United States Dollars, which is the func onal currency of the Company, and the presenta on currency for the consolidated nancial statements. In preparing the nancial statements of the individual group companies, transac ons in currencies other than the en tys func onal currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transac ons. At each repor ng date, monetary items that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange dierences are recognised in prot or loss in the period in which they arise except for:
exchange dierences on foreign currency borrowings rela ng to assets under construc on for future produc ve use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; exchange dierences on transac ons entered into to hedge certain foreign currency risks; and exchange dierences on monetary items receivable from or payable to a foreign opera on for which se lement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign opera on), which are recognised ini ally in other comprehensive income and reclassied from equity to prot or loss on repayment of the monetary items.
For the purpose of presen ng consolidated nancial statements, the assets and liabili es of the Groups foreign opera ons are translated into United States Dollars at exchange rates prevailing on the repor ng date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates uctuate signicantly during that period, in which case the exchange rates at the date of transac ons are used. Exchange dierences arising, if any, are recognised in other comprehensive income and accumulated in equity (a ributed to non-controlling interests as appropriate).
33

Re rement benets The Group does not have a legal obligation to provide for retirement benefits, however each subsidiary makes contribu ons for re rement benets as per the countrys statutory obliga ons and charged to prot and loss as payment falls due. Taxa on Income tax expense represents the sum of the tax paid and currently payable and deferred tax. Current tax The tax currently payable is based on taxable prot for the year. Taxable prot diers from prot as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deduc ble in other years and it further excludes items that are never taxable or tax deduc ble. The Groups liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substan vely enacted in countries where the Company and subsidiaries operate at the repor ng date. Deferred tax Deferred tax is recognised on temporary dierences between carrying amounts of assets and liabili es in the nancial statements and the corresponding tax bases used in the computa on of taxable prot. Deferred tax liabili es are generally recognised for all taxable temporary dierences and deferred tax assets are generally recognised for all deduc ble temporary dierences to the extent that it is probable that taxable prots will be available against which those deduc ble temporary dierences can be u lised. Such deferred tax assets and liabili es are not recognised if the temporary dierence arises from goodwill or from the ini al recogni on (other than in a business combina on) of other assets and liabili es in a transac on that aects neither the taxable prot nor the accoun ng prot. Deferred tax liabili es are recognised for taxable temporary dierences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary dierence and it is probable that the temporary dierence will not reverse in the foreseeable future. Deferred tax assets arising from deduc ble temporary dierences associated with such investments and interests are only recognised to the extent that it is probable that there will be sucient taxable prots against which to u lise the benets of the temporary dierences and are expected to reverse in the foreseeable future. The carrying amounts of deferred tax assets are reviewed at each repor ng date and reduced to the extent that it is no longer probable that sucient taxable prots will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabili es are measured at the tax rates that are expected to apply in the period in which the liability is se led or the asset realised, based on tax rates (and tax laws) that have been enacted or substan vely enacted at the repor ng date. The measurement of deferred tax liabili es and assets reects the tax consequences that would follow from the manner in which the Group expects, at the repor ng date, to recover or se le the carrying amount of its assets and liabili es. Deferred tax assets and liabili es are oset when there is a legally enforceable right to set o current tax assets against current tax liabili es and when they relate to income taxes levied by the same taxa on authority and the Group intends to se le its current tax assets and liabili es on the net basis. Current and deferred tax for the year Current and deferred tax are recognised in prot or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respec vely. Where current tax or deferred tax arises from the ini al accoun ng for a business combina on, the tax eect is included in the accoun ng for the business combina on.
34

Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average method. Redundant and slow moving stocks are iden ed and wri en down to their es mated economic or realisable values. Net realisable value represents the es mated selling price less all es mated costs of comple on and costs to be incurred in marke ng, selling and distribu on. Borrowing costs Borrowing costs directly a ributable to the acquisi on, construc on or produc on of qualifying assets, which are assets that necessarily take a substan al period of me to get ready for their intended use or sale, are added to the cost of those assets, un l such me as the assets are substan ally ready for their intended use or sale. To the extent that variable rate borrowings are used to nance a qualifying asset and are hedged in an eec ve cash ow hedge of interest rate risk, the eec ve por on of the deriva ve is recognised in the other comprehensive income and released to prot or loss when the qualifying asset impacts prot or loss. To the extent that xed rate borrowings are used to nance a qualifying asset and are hedged in an eec ve fair value hedge of interest rate risk, the capitalised borrowing costs reect the hedged interest rate. Investment income earned on the temporary investment of specic borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisa on. All other borrowing costs are recognised in prot or loss in the period in which they are incurred. Leasing The Group as lessee Opera ng lease payments are recognised as an expense on a straight-line basis over the lease terms, except where another systema c basis is more representa ve of the me pa ern in which economic benets from the leased assets are consumed. Con ngent rentals arising under opera ng leases are recognised as an expense in the period in which they are incurred. In the event that lease incen ves are received to enter into opera ng leases, such incen ves are recognised as a liability. The aggregate benet of incen ves is recognised as a reduc on on rental expense on a straight-line basis, except where another systema c basis is more representa ve of the me pa ern in which economic benets from the leased asset are consumed. Share-based payments Equity-se led share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-se led share-based payments is expensed on a straight- line basis over the ves ng period, based on the Groups es mate of equity instruments that will eventually vest. At each repor ng date, the Group revises its es mate of the number of equity instruments expected to vest. The impact of the revision of the original es mates, if any, is recognised in prot or loss over the remaining ves ng period, with a corresponding adjustment to the equity-se led employee benets reserve. Financial instruments Financial assets and nancial liabili es are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and nancial liabili es are ini ally measured at fair value. Transac on costs that are directly a ributable to the acquisi on or issue of nancial assets and nancial liabili es (other than nancial assets and nancial liabili es at fair value through prot or loss) are added to or deducted from the fair value of the nancial assets or nancial liabili es, as appropriate, on ini al recogni on. Transac on costs directly a ributable to the acquisi on of nancial assets or nancial liabili es at fair value through prot or loss are recognised immediately in prot or loss.
35

Financial instruments (con nued) Eec ve interest method The eec ve interest method is a method of calcula ng the amor sed cost of a nancial asset and of alloca ng interest income over the relevant period. The eec ve interest rate is the rate that exactly discounts es mated future cash receipts (including all fees on points paid or received that form an integral part of the eec ve interest rate, transac on costs and other premiums or discounts) through the expected life of the nancial asset, or, where appropriate, a shorter period. Income is recognised on an eec ve interest basis for debt instruments. Trade receivables Trade receivables are stated at their nominal value as reduced by appropriate allowances for es mated irrecoverable amounts. Derecogni on of nancial assets The Group derecognises a nancial asset only when the contractual rights to the cash ows from the asset expire, or when it transfers the nancial asset and substan ally all the risks and rewards of ownership of the asset to another en ty. If the Group neither transfers nor retains substan ally all the risks and rewards of ownership and con nues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substan ally all the risks and rewards of ownership of a transferred nancial asset, the Group con nues to recognise the nancial asset and also recognises a collateralised borrowing for the proceeds received. On derecogni on of a nancial asset in its en rety, the dierence between the asset's carrying amount and the sum of the considera on received and receivable and the cumula ve gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in prot or loss. On derecogni on of a nancial asset other than in its en rety (e.g. when the Group retains an op on to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the nancial asset between the part it con nues to recognise under con nuing involvement, and the part it no longer recognises on the basis of the rela ve fair values of those parts on the date of the transfer. The dierence between the carrying amount allocated to the part that is no longer recognised and the sum of the considera on received for the part no longer recognised and any cumula ve gain or loss allocated to it that had been recognised in other comprehensive income is recognised in prot or loss. A cumula ve gain or loss that had been recognised in other comprehensive income is allocated between the part that con nues to be recognised and the part that is no longer recognised on the basis of the rela ve fair values of those parts. Financial liabili es and equity Financial liabili es and equity instruments issued by the Group are classied according to the substance of the contractual arrangements entered into and the deni ons of a nancial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group a er deduc ng all of its liabili es. The accoun ng policies adopted for specic nancial liabili es and equity instruments are set out below. Other nancial liabili es Other nancial liabili es, including borrowings and trade payables, are ini ally measured at fair value, net of transac on costs. Other nancial liabili es are subsequently measured at amor sed cost using the eec ve interest method, with interest expense recognised on an eec ve yield basis. Derecogni on of nancial liabili es The Group derecognises nancial liabili es when, and only when, the Companys obliga ons are discharged, cancelled or they expire.
36

Financial instruments (con nued) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an en ty a er deduc ng all of its liabili es. Equity instruments are recorded at the proceeds received, net of direct issue costs. Investments in subsidiaries Investments in subsidiaries are carried at cost less impairment in the stand-alone nancial statements of the Company. Cri cal accoun ng judgments and key sources of es ma on and uncertainty In the process of applying the Group's accoun ng policies, management has made the following judgements, apart from those involving es ma ons, which have the most signicant eect on the amounts recognised in the nancial statements: Impairment of assets Determining whether assets are impaired requires an es ma on of the value in use of the assets being tested for impairment. The value in use calcula on required the directors to es mate the future cash ows expected to arise from the use of the assets and a suitable discount rate in order to calculate present value. Residual value and useful life The Group depreciates its assets over its es mated useful lives taking into account residual values, which, following the adop on of IAS16 Property, plant and equipment, are re-assessed on an annual basis. The actual lives and residual values of these assets can vary depending on a variety of factors. Technological innova on, product life cycles and maintenance programmes all impact the useful lives and residual values of the assets. Residual value assessments consider issues such as future market condi ons, the remaining life of the asset and projected disposal values. Income taxes The Group recognises the net future tax benet related to deferred income tax assets to the extent that it is probable that the deduc ble temporary dierences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make signicant es mates related to expecta ons of future taxable income. Es mates of future taxable income are based on forecast cash ows from opera ons and the applica on of exis ng tax laws in each jurisdic on. To the extent that future cash ows and taxable income dier signicantly from es mates, the ability of the Group to realise the net deferred tax assets recorded at the repor ng date could be impacted. Addi onally, future changes in tax laws in the jurisdic ons in which the Group operates could limit the ability of the Group to obtain tax deduc ons in future periods. New venture costs The Group capitalises costs incurred in securing new contracts and in the ini al set up phase of such contracts. These costs are only capitalised if management adjudges the probability of successfully securing the contract as probable. During such assessment management takes into account the fact pa erns specic to the contract involved.
37

Cri cal accoun ng judgments and key sources of es ma on and uncertainty (con nued) Share-based payments In calcula ng the charge for the year under IFRS 2, Share-based payments, certain assump ons have been made surrounding the future performance of the Capital Drilling Limited share price and the number of employees likely to remain employed during the dura on of the op on life period. In addi on, in order to arrive at a fair value for each of the grants, certain parameters have been assumed for the 2010 and 2011 grants and these have been disclosed in note 18. Con ngent liabili es Management applies its judgement to the fact pa erns and advice it receives from its a orney, advocates and other advisors in assessing if an obliga on is probable, more likely than not, or remote. This judgement applica on is used to determine if the obliga on is recognised as a liability or disclosed as a con ngent liability.
4.
Revenue
Group 2012 $ Revenue from the rendering of services comprises: Drilling revenue Informa on technology revenue Procurement revenue Equipment rental Total revenue 2011 $ 2012 $ Company 2011 $
156,325,288 652,473 1,909,195 158,886,956
128,475,715 655,669 94,660 1,238,753 130,464,797
10,848,799 10,848,799
7,405,662 7,405,662
5.
Prot (loss) from opera ons

The following items have been recognised as (income) expenses in determining prot (loss) from opera ons: Group 2012 $ Deprecia on: - Drilling rigs - Associated drilling equipment - Vehicles and trucks - Camp and associated equipment Total deprecia on Opera ng lease expense Foreign exchange loss (gain) Loss on disposal of property, plant and equipment Legal and professional fees Sta costs Share-based payment expense Dividends from subsidiaries Bad debt 2011 $ 2012 $ Company 2011 $
7,355,361 5,948,567 1,818,585 1,032,931 16,155,444 1,929,026 384,813 729,994 955,792 49,777,471 51,946 124,441
5,664,921 3,801,285 1,041,117 667,776 11,175,099 1,243,114 360,397 353,635 905,836 35,324,574 126,300 251,710
2,318,789 942,760 640,963 187,653 4,090,165 22,829 1,466 288,204 417,947 7,763,412 51,946
2,424,196 498,684 431,253 105,823 3,459,956 21,515 (24,496) 220,806 318,015 4,968,598 126,300 (4,005,626)
38

6. Finance charges
Group 2012 $ Finance creditors Bank loans Others Total nance charges 144,745 1,879,241 2,023,986 2011 $ 166,182 894,683 43,746 1,104,611 2012 $ 12,977 12,977 Company 2011 $
7.
Taxa on
Group 2012 $ Current taxa on: - Normal tax - current year - Normal tax - prior year (under) over provision - Withholding tax Deferred taxa on Total taxa on 1,571,157 (96,073) 2,797,703 541,926 4,814,713 1,090,892 310,586 2,150,936 602,174 4,154,588 2011 $ 2012 $
Company 2011 $
885,594 885,594
11,224 436,300 447,524
Capital Drilling Limited is incorporated in Bermuda. No taxa on is payable on the results of the Bermuda business. Taxa on for other jurisdic ons is calculated in terms of the legisla on and rates prevailing in the respec ve jurisdic ons. The taxa on charge for the year can be reconciled to the theore cal amount that would arise using the basic tax rate on the prot per the statement of comprehensive income as follows: Group 2012 $ Prot (loss) before tax Tax at domes c rates applicable to prot and losses in the jurisdic ons in which the Group operates Foreign withholding taxes paid Tax eect of permanent dierences in determining taxable prot Prior year (under) over provision Change in unrecognised deferred tax assets 18,925,584 2011 $ 21,743,200 2012 $ (13,774,330) Company 2011 $ (2,662,947)
1,139,050 2,767,703 (129,295) (96,073) 1,133,328 4,814,713
469,578 2,150,936 317,437 310,586 906,051 4,154,588
(31,797) 885,594 5,656 26,141 885,594
(39,969) 436,300 13,039 11,224 26,930 447,524
The Groups consolidated income tax expense is aected by the varying tax laws and income tax rates in eect in the various countries in which it operates, which are mainly in Africa and La n America. The increase in the average statutory rate in the reconcilia on above reects changes in prot mix between jurisdic ons from year to year.
39

8. Earnings per share
Basic earnings per share The earnings and weighted average number of ordinary shares used in the calcula on of basic earnings per share are as follows: Group 2012 Prot for the year a ributable to equity holders of the parent, used in the calcula on of basic earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Basic earnings per share (cents) Diluted earnings per share The earnings used in the calcula ons of all diluted earnings per share measures are the same as those used in the equivalent basic earnings per share measures, as outlined above. Group 2012 Weighted average number of ordinary shares used in the calcula on of basic earnings per share Shares deemed to be issued for no considera on in respect of: - Dilu ve share op ons Weighted average number of ordinary shares used in the calcula on of diluted earnings per share Diluted earnings per share (cents) 134,592,800 2011 134,592,800 $14,110,871 134,592,800 10.5 2011 $17,588,612 134,592,800 13.1
134,592,800 10.5
393,595 134,986,395 13.0
9.
Dividends
No dividends were declared during the year under review (2011: $nil).
40

10. Property, plant and equipment
Associated drilling equipment $ Camp and associated equipment $
Drilling rigs $ Group - 2012 Cost Balance at 1 January 2012 Addi ons Disposals Transla on of foreign opera ons Balance at 31 December 2012 Accumulated deprecia on Balance at 1 January 2012 Deprecia on for the year Disposals Transla on of foreign opera ons Balance at 31 December 2012 Carrying amount at 31 December 2012 Carrying amount at 31 December 2011 (12,756,777) (7,355,361) 1,919,631 (18,192,507) 50,673,487 42,177,721 54,934,498 16,783,686 (2,852,190) 68,865,994
Vehicles and trucks $
Total $
16,125,870 5,509,418 (3,145,523) 18,489,765
11,149,502 4,461,502 (1,071,799) 14,539,205
4,360,530 3,237,886 (233,855) 1,820 7,366,381
86,570,400 29,992,492 (7,303,367) 1,820 109,261,345
(7,113,646) (5,948,567) 3,083,254 (9,978,959) 8,510,806 9,012,224
(3,620,041) (1,818,585) 795,892 (4,642,734) 9,896,471 7,529,461
(1,582,238) (1,032,931) 212,848 (1,069) (2,403,390) 4,962,991 2,778,292
(25,072,702) (16,155,444) 6,011,625 (1,069) (35,217,590) 74,043,755 61,497,698
Drilling rigs, vehicles and trucks, with a total net book value of $2,049,010 (2011: $4,227,007) are encumbered as disclosed in note 19 to the annual nancial statements. At the end of each repor ng period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indica on that those assets may be impaired. Due to the poor performance of the Groups share price in 2012, the net asset value of the Group exceeded its market capitalisa on as at 31 December 2012. The Group iden ed this circumstance as an indicator of impairment for the current period. As a result property, plant and equipment was tested for impairment at the repor ng date. As at this date management concluded that the carrying amount of property, plant and equipment did not exceed the value in use and therefore, no impairment loss was recognised on that basis. No impairment test was performed as at 31 December 2011, as at this date there were no indicators of impairment. For purposes of determining the recoverable value of tangible assets, management es mates discount rates using pre-tax rates that reect current market rates for investments of similar risk. The rate was es mated from the weighted average cost of capital of companies, which operate a por olio of assets similar to those of the Groups assets. In valida ng the value in use, key assump ons used in the discounted cash-ow model (such as discount rates, average revenue rates, drilling volumes and terminal growth rate) management performed a sensi vity analysis to test the resilience of the assump ons used in determining the value in use for the impairment test. Management believe that reasonable movements in key assump ons would not result in an impairment loss to be recognised.
41

10. Property, plant and equipment (con nued)
Drilling rigs $ Group - 2011 Cost Balance at 1 January 2011 Addi ons Disposals Transla on of foreign opera ons Balance at 31 December 2011 Accumulated deprecia on Balance at 1 January 2011 Deprecia on for the year Disposals Transla on of foreign opera ons Balance at 31 December 2011 Carrying amount at 31 December 2011 Carrying amount at 31 December 2010
Total $
42,506,038 14,703,945 (2,275,485) 54,934,498
10,882,442 7,424,336 (2,180,908) 16,125,870
9,126,328 2,803,142 (779,968) 11,149,502
2,945,413 1,774,731 (360,548) 934 4,360,530
65,460,221 26,706,154 (5,596,909) 934 86,570,400
(7,639,401) (5,664,921) 547,545 (12,756,777) 42,177,721 34,866,637
(5,474,776) (3,801,285) 2,162,415 (7,113,646) 9,012,224 5,407,666
(3,019,476) (1,041,117) 440,552 (3,620,041) 7,529,461 6,106,852
(1,191,141) (667,776) 276,591 88 (1,582,238) 2,778,292 1,754,272
(17,324,794) (11,175,099) 3,427,103 88 (25,072,702) 61,497,698 48,135,427
Drilling rigs, vehicles and trucks, with a total net book value of $4,227,007 (2010: $5,299,583) are encumbered as disclosed in note 19 to the annual nancial statements. Associated drilling equipment $ Camp and associated equipment $
Drilling rigs $ Company - 2012 Cost Balance at 1 January 2012 Addi ons Net transfers to subsidiaries Disposals Balance at 31 December 2012 Accumulated deprecia on Balance at 1 January 2012 Deprecia on for the year Net transfers to subsidiaries Disposals Balance at 31 December 2012 Carrying amount at 31 December 2012 Carrying amount at 31 December 2011
Total $
26,848,547 4,843,528 (9,820,397) (602,691) 21,268,987
4,213,571 36,764 (684,228) (85,227) 3,480,880
4,500,087 1,072,377 (676,058) (720,634) 4,175,772
749,075 335,819 (48,112) (76,586) 960,196
36,311,280 6,288,488 (11,228,795) (1,485,138) 29,885,835
(5,596,785) (2,318,789) 3,388,057 167,451 (4,360,066) 16,908,921 21,251,762
(1,274,308) (942,760) 453,827 61,487 (1,701,754) 1,779,126 2,939,263
(1,536,061) (640,963) 395,982 526,728 (1,254,314) 2,921,458 2,964,026
(362,712) (187,653) 24,093 70,033 (456,239) 503,957 386,363
(8,769,866) (4,090,165) 4,261,959 825,699 (7,772,373) 22,113,462 27,541,414
42

10. Property, plant and equipment (con nued)
Drilling rigs $ Company - 2011 Cost Balance at 1 January 2011 Addi ons Net transfers from subsidiaries Disposals Balance at 31 December 2011 Accumulated deprecia on Balance at 1 January 2011 Deprecia on for the year Net transfers to (from) subsidiaries Disposals Balance at 31 December 2011 Carrying amount at 31 December 2011 Carrying amount at 31 December 2010 (3,544,054) (2,424,196) 371,465 (5,596,785) 21,251,762 17,907,024 21,451,078 6,692,994 (1,295,525) 26,848,547
Total $
2,585,095 1,706,392 4,355 (82,271) 4,213,571
2,887,300 1,490,417 694,089 (571,719) 4,500,087
538,034 280,915 80,453 (150,327) 749,075
27,461,507 10,170,718 778,897 (2,099,842) 36,311,280
(910,657) (498,684) 52,760 82,273 (1,274,308) 2,939,263 1,674,438
(1,339,765) (431,253) (13,144) 248,101 (1,536,061) 2,964,026 1,547,535
(264,863) (105,823) (85,875) 93,849 (362,712) 386,363 273,171
(6,059,339) (3,459,956) (46,259) 795,688 (8,769,866) 27,541,414 21,402,168
43

11. Investment in subsidiaries
Details of the companys subsidiaries at 31 December 2012 are as follows: Issued share capital $ Capital Drilling (Botswana) (Proprietary) Limited Capital Drilling Egypt (Limited Liability Company) Capital Drilling (Ghana) Limited Capital Drilling Moambique Limitada Capital Drilling (Malaysia) Sdn. Bhd. Capital Drilling Mauritania SARL Capital Drilling (Mauri us) Limited Capital Drilling Namibia (Proprietary) Limited Ghana Mozambique Malaysia Mauritania Mauri us Namibia 50,000 2,055 1,000 3,530 14 1,000 111,000 1 13 56,980 50,000 1,587 18,600 16,000 100 1 1 2,510,286 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 1 100 100 1 100 100 100 100 100 20 1,110 1 443,826 18,600 16,000 100 1,071,483 20 1 443,826 18,600 16,000 100 1,070,373 Percentage Percentage held by held by group company % % Carrying value in the Company nancial statements 2012 2011 $ $
Unlisted subsidiaries
Country of incorpora on
Botswana Egypt
100 200,000
100 100
100
591,826
591,826
The Capital Drilling Netherlands Copera ef U.A. Netherlands Capital Drilling Perforaciones Chile Limitada Capital Drilling Service Plc Capital Drilling (Singapore) Pte. Ltd. Capital Drilling South Africa (Proprietary) Limited Capital Drilling Sondagens do Brasil Ltda. Capital Drilling (T) Limited Capital Drilling Zambia Limited Cap-Sat Technologies Limited Supply Force Interna onal Ltd Well Force Interna onal Ltd Supply Force Interna onal Pte Ltd Supply Force Interna onal (Aust) Pty Ltd Capital Drilling D.O.O. Chile Ethiopia Singapore South Africa Brazil Tanzania Zambia Bermuda Bermuda Bermuda Singapore Australia Serbia
During 2010, a decision was taken by the board of directors to liquidate and deregister the opera ons of Capital Drilling D.O.O. The drilling contracts of this subsidiary have come to an end and the Company became dormant. The assets used by the Company have been transferred to other opera ons of the Group. The liquida on and deregistra on process of this company was completed in December 2012.
44

12. Deferred tax
The following are the major deferred tax assets and liabili es recognised by the Group and their movements: Group 2012 $ Movements Balance at beginning of the year Excess of capital allowances over deprecia on Prepayments Provisions Net unrealised exchange losses Tax loss carried forward Balance at end of the year Balance at end of the year Excess of capital allowances over deprecia on Net unrealised exchange losses Prepayments Provisions Tax loss carried forward Balance at end of the year Disclosed as follows: Deferred tax assets Deferred tax liabili es 2011 $
(977,336) (295,014) 420 11,417 19,845 (278,594) (1,519,262)
(375,162) (982,646) (621) (20,315) 6,048 395,360 (977,336)
(1,757,380) 16,975 (2,388) 31,140 192,391 (1,519,262)
(1,462,366) (2,870) (2,808) 19,723 470,985 (977,336)
79,867 1,599,129
56,231 1,033,567
At the repor ng date, the Group has tax losses carried forward of $10.3 million (2011: $7.2 million) with a tax value of $2.9 million (2011: $2.0 million) available for oset against future prots. A deferred tax asset has been recognised to the value of $0.2 million (2011: $0.5 million) in respect of such losses. No deferred tax asset has been recognised in respect of the remaining tax losses amoun ng to $8.8 million (2011: $5.4 million) with a tax value of $2.7 million (2011: $1.5 million) as there is uncertainty whether there will be sucient future taxable prots available to oset these losses. These losses may be carried forward indenitely. At the repor ng date, the aggregate amount of temporary dierences associated with unremi ed earnings of overseas subsidiaries for which deferred tax liabili es have not been recognised, amounted to $108.3 million (2011: $77.1 million). No liability has been recognised in respect of these dierences because the Group is in a posi on to control the ming of declara on of dividends from the subsidiaries and it is expected that such dierences will not reverse in the foreseeable future.
13.
Inventory
Group 2012 $ Drilling consumables Goods-in-transit 21,633,853 971,266 22,605,119 2011 $ 18,108,314 2,309,107 20,417,421 2012 $ 384,874 9,319 394,193 Company 2011 $ 1,399,961 104,163 1,504,124
Inventory cost recognised as an expense during the year was $23.8 million (2011: $22.8 million).
45

14. Trade and other receivables
Group 2012 $ Trade receivables VAT receivables Other receivables 22,798,850 2,787,593 384,164 25,970,607 Trade receivables have a 15 or 30 day credit period. Of the Group trade receivables of $22,798,850 (2011: $16,272,418) outstanding at 31 December 2012, $15,404,356 (2011: $11,558,190) is within the agreed credit terms, $6,614,573 (2011: $4,213,883) is less than 30 days overdue, while the remaining amount is more than 30 days overdue. Of the Company trade receivables of $1,032,323 (2011: $627,193) outstanding at 31 December 2012, $936,147 (2011: $524,325) is within the agreed credit terms and $86,688 (2011: $102,868) is less than 30 days overdue, while the remaining amount is more than 30 days overdue. Before accep ng any new customer, the Group assesses the poten al customers credit quality and denes credit limits by customer. Limits a ributed to customers are reviewed annually. The Group's credit risk is concentrated as the Group currently provides drilling services to a limited number of major and junior explora on and mining companies opera ng in the countries the Group operates in. No allowance is made for doub ul debts, as the directors an cipate 100% recoverability of the trade receivables. The directors consider that the carrying amount of trade and other receivables approximate their fair values. 2011 $ 16,272,418 3,646,347 287,232 20,205,997 2012 $ 1,032,323 36,429 1,068,752 Company 2011 $ 627,193 19,547 646,740
15.
Aliate accounts receivable

Company 2012 $ Capital Drilling (Zambia) Limited Capital Drilling Netherlands Copera ef U.A. Capital Drilling Service Plc Capital Drilling Perforaciones Chile Limitada Capital Drilling Moambique Limitada Capital Drilling Egypt (Limited Liability Company) Capital Drilling Namibia (Proprietary) Limited Capital Drilling Papua New Guinea (foreign contractor branch) Capital Drilling (Botswana) (Proprietary) Limited Capital Drilling (Ghana) Limited Cap-Sat Technologies Limited Supply Force Interna onal Limited Well Force Interna onal Limited Capital Drilling Sondagens do Brasil Ltda. 2,294,985 10,779,283 1,081,116 4,630,729 1,903,285 332,725 11,934 4,757 154,882 104,694 410,364 99,103 936 21,808,793 2011 $ 3,345,874 5,024,554 3,328,527 2,020,129 11,934 382,366 3,783 818,079 3,468 647,058 91,943 15,677,715
These receivables are interest free, unsecured and have no xed terms of repayment. These amounts are denominated in United States Dollars.
46

16. Cash and cash equivalents
Cash and cash equivalents comprise: Group 2012 $ Bank balances Pe y cash 9,001,426 62,180 9,063,606 Bank overdra Net cash and cash equivalents 9,063,606 2011 $ 7,671,221 45,232 7,716,453 (3,671,640) 4,044,813 2012 $ 1,401,731 5,517 1,407,248 1,407,248 Company 2011 $ 1,110,503 1,308 1,111,811 1,111,811
The directors consider that the carrying amounts of cash and cash equivalents approximate their fair values.
17.
Share capital
Group 2012 $ Authorised: 2 000 000 000 (2010: 2 000 000 000) ordinary shares of 0.01 cents (2010: 0.01 cents) each Issued and fully paid: 134 592 800 (2010: 134 592 800) ordinary shares of 0.01 cents (2010: 0.01 cents) each Share premium: Balance at the beginning and end of the year 21,561,190 21,561,190 21,561,190 21,561,190 13,459 13,459 13,459 13,459 200,000 200,000 200,000 200,000 2011 $ 2012 $ Company 2011 $
47

18. Equity-se led employee benets
2010 Discre onary share op on plan: On 28 May 2010, shareholders approved the 2010 Discre onary share op on plan which was adopted by the board of directors on the same date. All previous share op on plans were terminated on that date. All employees of the Group are eligible to par cipate in the scheme. Employees to whom op ons are oered are required to accept the oer prior to issuance of the op on cer cate. Op ons are exercisable at a price equal to the average quoted market price of the Group's shares on the date of grant. The ves ng period is three years or shorter or longer period as determined by the Remunera on Commi ee on the date of grant. If the op ons remain unexercised a er a period of ten years from the date of grant the op ons expire. Op ons are forfeited if the employee leaves the Group before the op ons vest. Details of the share op ons outstanding during the year are as follows: Weighted average Weighted grant date average fair value per exercise price op on 2010 Series 19/11/2010 to 15/12/2010 2,520,000 on 1/1/2011 on 1/1/2012 on 1/1/2013 2011 Series 25/02/2011 to 04/03/2011 80,000 on 1/1/2012 on 1/1/2013 on 1/1/2014 Op ons were priced using a binomial op on pricing model. Where relevant, the expected life used in the model was adjusted based on managements best es mate for the eects of non-transferability, exercise restric ons, and behavioural considera ons. Expected vola lity is based on management's expecta on of the future vola lity in the Company's share price. In 2012 the Group recognised total expenses of $51,946 (2011: $126,300) related to the 2010 and 2011 Series of the 2010 discre onary share op on plan. 31/12/2014 0.800 0.245 31/12/2014 0.800 0.078 $
Acceptance date by employee
Number
Ves ng date
Expiry date
Group and company 2011 Series Inputs into the model Grant date share price Grant date exchange rate (1 GBP = USD) Exercise price Expected vola lity Op on life Dividend yield Risk-free interest rate 0.905 - 0.910 1.473 - 1.475 0.80 5.0% 1041 days 0.0% 0.5% 0.770 - 0.815 1.555 - 1.599 0.80 5.0% 1503 days 0.0% 0.5% 2010 Series
48

18. Equity-se led employee benets reserve (con nued)
The following reconciles the number of outstanding share op ons granted under the 2010 Discre onary share op on plan at the beginning and end of the year: Group and company 2012 Balance at beginning of the year Granted during the year Forfeited during the year Balance at end of the year Exercisable at the end of the year 2,600,000 (240,000) 2,360,000 2011 2,520,000 80,000 2,600,000
19.
Long-term liabili es
Group 2012 $ Stanbic Bank Zambia Limited Balance at the beginning of the year Amount received during the year Capital repayments during the year 2,543,193 (2,543,193) 2011 $ 1,818,795 1,750,000 (1,025,602) 2,543,193 (1,062,736) 1,480,457
Less: Current por on included under current liabili es Due a er more than one year
The ini al loan drawdown of $2.2 million in 2009 was repayable over 4 years and carried an interest rate of LIBOR plus 8%. The loan was denominated in United States Dollars. Proceeds of a drilling contract with Equinox Zambia Limited were assigned to Stanbic Bank Zambia Limited as security for the loan. The loan was also secured by drilling rigs and vehicles with a total net book value of $1,864,288 as at 31 December 2011. Also refer to note 10. In September 2011, a term loan facility of $1.75 million was entered into. The term loan facility was repayable over 3 years and carried an interest rate of three months LIBOR plus 5.5%. The loan was denominated in United States Dollars. Proceeds of a drilling contract with Lumwana Copper Mines Limited were assigned to Stanbic Bank Zambia Limited as security for this loan. The loan was also secured by the remaining drilling rigs and vehicles of Capital Drilling (Zambia) Limited.
49

19. Long-term liabili es (con nued)
In January 2012, the Group concluded a comprehensive debt renancing package to consolidate exis ng debt, reduce borrowing costs and support the Group's growth plans. As a result, the loan with Stanbic Bank Zambia Limited was fully repaid as at 31 December 2012. Group 2012 $ Atlas Copco Customer Finance AB Balance at the beginning of the year Capital repayments during the year 1,479,067 (657,363) 821,704 Less: Current por on included under current liabili es Due a er more than one year (657,363) 164,341 2,175,108 (696,041) 1,479,067 (657,363) 821,704 2011 $
The Atlas Copco loan is denominated in United States Dollars and incurs interest at a xed interest rate of 8.9% per annum. The loan is repayable in quarterly instalments of $164,341 in arrears over a period of four years. The loan is secured against drilling rigs with a net book value of $2,049,010 (2011: $2,362,719). Also refer note 10. Standard Bank (Mauri us) Limited Balance at the beginning of the year Amount received during the year Capital repayments during the year 14,666,667 29,200,000 (15,637,511) 28,229,156 Less: Current por on included under current liabili es Due a er more than one year (229,156) 28,000,000 13,666,667 5,000,000 (4,000,000) 14,666,667 (9,000,000) 5,666,667
In 2010, the Group (through Capital Drilling (Mauri us) Limited) entered into a debt facility with Standard Bank (Mauri us) Limited. The facility comprises (i) a $15 million medium term loan (MTL) facility and (ii) a $1 million se lement limit facility. The MTL facility was fully drawn down during 2010 and was repayable over four years from the earliest of the rst anniversary of the rst draw down or full u lisa on. The MTL facility has an annual interest rate of 5.5% above the prevailing three month US$ LIBOR (payable in arrears). Standard Bank (Mauri us) Limited has charged a structuring fee of 1% of the MTL facility and an annual commitment fee of 1.25% of the undrawn balances of the MTL facility. In November 2011, the Group obtained addi onal borrowings of $5 million under the MTL Facility ("Reinstated Facility"), which increased the MTL Facility to $15 million. This was a short term loan facility with a six months op on to renance without penalty. The Reinstated Facility was fully drawn down during the year 2011 and was repayable at maturity and had an annual interest rate of 3.75% above the prevailing three month US$ LIBOR. In January 2012, the Group (through the Company and Capital Drilling (Mauri us) Limited) entered into a new debt facility with Standard Bank (Mauri us) Limited. The facility comprises (i) a $17 million Term Loan Facility ("TLF"), (ii) a $30 million Revolving Facility ("RF") and (iii) a $15 million Treasury Facility ("TF"). The TLF was fully drawn down during 2012 and is repayable in full, 36 months a er the u lisa on date of 31 January 2012. The TLF facility has an annual interest rate of 3.75% above the prevailing three month US$ LIBOR (payable in arrears). As at 31 December 2012, $11 million of the RF was drawn down. The RF has an annual interest rate of 4.15% above the prevailing three month US$ LIBOR (payable in arrears). Standard Bank (Mauri us) Limited has charged an annual commitment fee of 0.75% of the undrawn balances of the RF. As at 31 December 2012, $19 million of the RF and the full amount of the TF remains available for u lisa on.
50

19. Long-term liabili es (con nued)
Security for the new Standard Bank (Mauri us) Limited facili es comprises:
Upward corporate guarantees from Capital Drilling Egypt (Limited Liability Company), Capital Drilling (Tanzania) Limited, Capital Drilling Perforaciones Chile Limitada and Capital Drilling Zambia Limited. A nega ve pledge over the assets of Capital Drilling Ltd and Capital Drilling Egypt (Limited Liability Company).
The Group's principal credit facili es with Standard Bank (Mauri us) Limited include the following nancial covenants:

Interest Cover, the ra o of EBITDA to Interest in respect of the relevant period, shall not be less than 8.0; Debt Service Ra o, nancial indebtedness to EBITDA, shall not be greater than 2.0; Debt Equity Ra o, nancial indebtedness to the sum of ordinary share capital, all consolidated reserves and retained earnings less intangibles, shall not exceed 0.5; Total Tangible Net Worth, the sum of ordinary share capital, all consolidated reserves and retained earnings less intangibles, shall not be less than $60 million.
EBITDA for the purpose of ascertaining the loan covenant compliance means prot for the year before taking account of the following items:

Net interest payable Tax charged per the statement of comprehensive income Deprecia on per the statement of comprehensive income Other non-cash items.
In addi on, there are dividend and transac on restric ons and a requirement for an all risks insurance policy on the assets. The ini al drawdown on 31 January 2012 was used primarily to repay the various facili es with Standard Bank (Mauri us) Limited and the loan of Stanbic Bank Zambia Limited that was outstanding as at 31 December 2011. Group 2012 $ Total long-term liabili es Less:Current por on included under current liabili es Total due a er more than one year 29,050,860 (886,519) 28,164,341 2011 $ 18,688,927 (10,720,099) 7,968,828 2012 $ Company 2011 $
As at 31 December 2012 the contractual scheduled maturi es of long-term liabili es, including short-term por ons were as follows: $ 2013 2014 2015 Total scheduled contractual obliga on 2,299,423 1,529,711 28,113,476 31,942,610
51

20. Trade and other payables
Group 2012 $ Trade payables Other payables - Accrued expenses - Value Added Tax - Employee related liabili es - Unearned revenue 3,275,932 587,024 1,178,348 11,840 16,246,045 3,315,456 446,647 1,268,190 288,461 14,498,360 212,582 42,750 959,376 272,531 34,418 282,951 1,121,446 11,192,901 2011 $ 9,179,606 2012 $ 704,044 Company 2011 $ 531,546
Total trade payables comprise liabili es for the purchase of goods and services. Trade payables have terms ranging from payment on delivery up to 60 days. The Group has nancial risk management policies in place to ensure that all payables are paid within the appropriate credit me frame. The directors consider that the carrying amount of trade and other payables approximate their fair values.
21.
Taxa on
Group 2012 $ Withholding tax Income tax 390,421 334,344 724,765 2011 $ 335,574 843,148 1,178,722 2012 $ Company 2011 $
22.
Aliate accounts payable

Company 2012 $ Capital Drilling (Mauri us) Limited Capital Drilling (Singapore) Pte. Ltd. Capital Drilling Mauritania SARL Capital Drilling South Africa (Proprietary) Limited Capital Drilling Egypt (Limited Liability Company) Capital Drilling Papua New Guinea (foreign contractor branch) Capital Drilling (Tanzania) Limited 26,394,028 1,896,926 18,818,506 263,347 69,738 5,565,210 53,007,755 2011 $ 7,832,544 226,791 8,306,383 275,258 4,639,136 17,941,415 39,221,527
These payables are interest free, unsecured and have no xed terms of repayment. These amounts are denominated in United States Dollars.
52

23. Cash from opera ons
Group 2012 $ Prot (loss) before tax Adjusted for: -Deprecia on -Loss on disposal of property, plant and equipment -Share-based payment expense -Exchange dierences on transla ng foreign opera ons -Finance charges Opera ng prot (loss) before working capital changes Adjustments for working capital changes: -(Increase) decrease in inventory -Increase in trade and other receivables -(Increase) decrease prepaid expenses and other assets -Increase in aliate accounts receivable -Increase (decrease) in trade and other payables -Increase in aliate accounts payable (2,187,698) (5,764,610) (188,385) 1,747,685 31,481,476 (5,493,540) (11,498,324) (1,643,910) (1,668,594) 14,204,899 1,109,931 (422,012) 1,283,219 (6,131,078) (162,070) 20,751,954 7,098,906 (751,611) (316,308) 258,890 (1,216,988) (1,599,757) 2,606,936 125,277 16,155,444 729,994 51,946 (12,470) 2,023,986 37,874,484 11,175,099 353,635 126,300 6,422 1,104,611 34,509,267 4,090,165 288,204 51,946 12,977 (9,331,038) 3,459,956 220,806 126,300 1,144,115 18,925,584 2011 $ 21,743,200 2012 $ (13,774,330) Company 2011 $ (2,662,947)
24.
Taxa on paid
Group 2012 $ Amount unpaid (receivable) at beginning of the year Amounts charged to the statement of comprehensive income (excluding deferred taxa on) Net amount receivable (unpaid) at the end of the year 285,885 5,369,886 (811,214) 3,043,313 873,239 12,355 594,357 811,214 2011 $ 302,113 2012 $ (12,355) Company 2011 $ 134,478
4,272,787
3,552,414
885,594
447,524
53

25. Auditor's remunera on
The Group auditors are Deloi e & Touche (South Africa) ("Deloi e"). The Group has engaged Deloi e and other audit rms to provide both audit and non-audit services to its various subsidiaries. Group 2012 $ Fees payable to the groups auditor for the audit of the groups annual nancial statements Fees payable to the groups auditor for other services Fees paid to associates of the groups auditor The audit of the groups subsidiaries Non-audit services subsidiaries Fees paid to other auditors The audit of the groups subsidiaries Non-audit services subsidiaries 82,683 56,880 467,519 82,086 99,615 467,666 2,000 34,360 3,300 31,877 91,778 38,393 105,112 21,030 167,291 30,494 2011 $ 135,652 24,171 2012 $ 32,360 Company 2011 $ 28,577
26.
Lease commitments
Leasing arrangements The Group has entered into several opera ng leases for premises, with a maximum period of up to ve years. The Group does not have an op on to purchase the leased asset at the expiry of the lease period. Group 2012 $ Non-cancellable opera ng lease commitments: Not longer than 1 year Between 1 and 5 years 1,283,703 338,444 1,622,147 991,991 247,930 1,239,921 9,564 33,552 43,116 2011 $ 2012 $ Company 2011 $
27.
Segmental analysis
Opera ng segments are iden ed on the basis of internal management reports about components of the Group that are regularly reviewed by the chief execu ve in order to allocate resources to the segments and to assess their performance. Informa on reported to the Groups chief execu ve ocer for the purposes of resource alloca on and assessment of segment performance is focused on the region of opera on. For the purposes of the segmental report, the informa on on the opera ng segments have been aggregated into the principal regions of opera ons of the Group. The Groups reportable segments under IFRS 8 are therefore: - Africa: - Rest of world: Derives revenue from the provision of drilling services. Derives revenue from the provision of drilling services and related logis c, equipment rental and IT support services.
Informa on regarding the Groups opera ng segments is reported below. At 31 December 2012, management reviewed the composi on of the Group's opera ng segments and the alloca ons of opera ons to the reportable segments.
54

27. Segmental analysis (con nued)
Segment revenue and results: The following is an analysis of the Groups revenue and results by reportable segment: Africa $ 2012 External revenue Segment gross prot Administra on costs and deprecia on 134,287,686 46,237,055 (28,652,945) 17,584,110 Central administra on costs and deprecia on Other income Prot from opera ons Finance charges Prot before tax 2011 External revenue Segment gross prot Administra on costs and deprecia on Central administra on costs and deprecia on Other income Prot from opera ons Finance charges Prot before tax 110,566,213 39,386,208 (18,150,113) 21,236,095 19,898,584 5,853,292 (3,657,862) 2,195,430 130,464,797 45,239,500 (21,807,975) 23,431,525 (595,579) 11,865 22,847,811 (1,104,611) 21,743,200 24,599,270 6,719,457 (2,943,390) 3,776,067 158,886,956 52,956,512 (31,596,335) 21,360,177 (411,708) 1,101 20,949,570 (2,023,986) 18,925,584 Rest of world $ Consolidated $
The accoun ng policies of the reportable segments are the same as the Groups accoun ng policies described in note 3. Segment prot represents the prot earned by each segment without alloca on of central administra on costs including, deprecia on, other income, nance charges, and income tax. This is the measure reported to the Groups chief execu ve ocer for the purpose of resource alloca on and assessment of segment performance. Segment assets: Group 2012 $ Africa Rest of world Total segment assets Head oce companies Elimina ons 193,327,371 72,956,446 266,283,817 27,260,154 293,543,971 (152,679,945) 140,864,026 2011 $ 188,854,646 52,365,197 241,219,843 20,279,000 261,498,843 (143,335,498) 118,163,345
55

27. Segmental analysis (con nued)
Segment liabili es: Group 2012 $ Africa Rest of world Total segment liabili es Head oce companies Elimina ons 49,629,302 40,919,989 90,549,291 108,663,170 199,212,461 (151,591,662) 47,620,799 2011 $ 80,099,857 25,324,533 105,424,390 75,843,565 181,267,955 (142,196,739) 39,071,216
For the purposes of monitoring segment performance and alloca ng resources between segments the Groups chief execu ve monitors the tangible, intangible and nancial assets a ributable to each segment. All assets are allocated to reportable segments with the excep on of property, plant and equipment used by the head oce companies, certain amounts included in other receivables, and cash and cash equivalents held by the head oce companies. Other segment informa on: Deprecia on Africa Rest of world Total segment assets Head oce companies 14,069,835 1,955,725 16,025,560 129,884 16,155,444 Addi ons to property, plant and equipment Deprecia on Africa Rest of world Total segment assets Head oce companies 24,794,465 5,020,007 29,814,472 178,020 29,992,492 Informa on about major customers Included in revenues arising from the Africa segment are revenues of approximately $77.1 million (2011: $69.1 million) which arose from sales to the customers that represent more than 10% of the Group's revenue. 21,561,933 4,912,735 26,474,668 231,486 26,706,154 9,478,171 1,629,914 11,108,085 67,014 11,175,099
56

28. Financial instruments
Capital risk management The Group manages its capital to ensure that en es in the Group will be able to con nue as a going concern while maximising the return to stakeholders through the op misa on of the debt and equity balance. The Groups overall strategy remains unchanged from 2010. The capital structure of the Group consists of debt, which includes the borrowings disclosed in notes 19 and 22, cash and cash equivalents disclosed in note 16 and equity a ributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 17 and the statement of changes in equity. Risk management is conducted within a framework of policies and guidelines that are con nuously monitored by management and the board of directors, the objec ve being to minimise exposure to market risks (interest rate risk, foreign currency risk and price risk), credit risk, and liquidity risk.
Group 2012 $ Categories of nancial instruments Financial assets Cash and cash equivalents Trade receivables Other receivables Aliate accounts receivable 9,063,606 22,798,850 384,164 32,246,620 Financial liabili es Trade and other payables Long-term liabili es Aliate accounts payable Bank overdra 16,246,045 29,050,860 45,296,905 Foreign currency risk management 14,498,360 18,688,927 3,671,640 36,858,927 7,716,453 16,272,418 287,232 24,276,103 2011 $ 2012 $
Company 2011 $
1,407,248 1,032,323 36,429 21,808,793 24,284,793
1,111,811 627,193 19,547 15,677,715 17,436,266
959,376 959,376
1,121,446 1,121,446
The Group undertakes transac ons in foreign currencies which give rise to exchange rate uctua on. To manage the Group's risk to foreign currency uctua ons and foreign exchange rate risk, the Group tries to match the currency of opera ng costs with the currency of revenue as well as the currency of nancial assets with currency of nancial liabili es. Financial assets and liabili es denominated in foreign currencies are reviewed regularly by management to ensure that the Group is not unduly exposed to foreign currencies.
57

28. Financial instruments (con nued)
Foreign currency risk management (con nued) The carrying amounts of the Groups foreign currency denominated monetary assets, consis ng of cash and other receivables, and monetary liabili es, consis ng of trade and other payables, at 31 December 2012 are as follows: Group 2012 $ Assets: Australian Dollar Chilean Peso Egyp an Pound South African Rand Tanzanian Shillings Zambian Kwacha All other currencies Liabili es Australian Dollar Chilean Peso Egyp an Pound South African Rand Tanzanian Shillings Zambian Kwacha All other currencies 1,726,242 1,907,973 1,531,415 1,317,888 584,173 2,401,324 1,586,284 11,055,299 Foreign Currency sensi vity analysis: The Group is exposed to a number of currencies, which are listed below. The following table details the Groups sensi vity to a 10% change in the United States Dollar against the relevant foreign currencies. The sensi vity analysis includes the outstanding foreign currency denominated monetary items year end together with the income and expense items during the year and adjusts their transla on for a 10% change in foreign currency rates. 2,037,360 1,321,985 852,087 1,683,727 438,928 1,659,590 1,918,632 9,912,309 3,392 237,620 13,506 254,518 197,321 1,195 198,516 331,312 1,149,749 396,763 231,796 1,938,278 3,639,080 2,128,343 9,815,321 567,470 1,357,647 238,555 128,495 2,782,952 522,826 1,466,758 7,064,703 225,695 9,809 125,987 361,491 2,651 40,621 43,272 2011 $ 2012 $ Company 2011 $
58

Foreign Currency sensi vity analysis: (con nued) The posi ve number below indicates an increase in prot where the United States Dollar strengthens by 10% against the relevant currency. For a 10% weakening of the United States Dollar against the relevant currency, there would be an equal and opposite impact on the prot. Group 2012 $ Australian Dollar prot (loss)* Chilean Peso prot (loss)* Egyp an Pound prot (loss)* South African Rand prot (loss)* Tanzanian Shillings prot (loss)* Zambian Kwacha prot (loss)* All other currencies prot (loss)*
* Before taxa on
Company 2011 $ 103,442 (3,242) 55,776 141,385 (213,093) 130,510 11,835 2012 $ (20,209) 20,710 9,224 2011 $ 17,697 (3,584)
126,812 68,400 103,150 98,736 (123,100) (112,523) (48,715)
A 10% strengthening of the United States Dollar against the basket of currencies in which the Group trade would result in an increase in the Groups net equity of $84,074 (2011: $183,313) and an increase in the companys net equity of $9,725 (2011: $14,113). Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obliga ons resul ng in nancial loss to the Group. Credit risk relates to poten al exposure on trade and other receivables and bank balances. Before accep ng any new customer, the Group assesses the poten al customers credit quality and denes credit limits by customer. Limits a ributed to customers are reviewed annually. Amounts owing from the Groups customers are con nuously monitored. The Group currently provides drilling services to a limited number of major and junior explora on and mining companies opera ng in the countries the Group operates in. The credit risk on bank balances is limited because the counterpar es are banks with high credit-ra ngs assigned by interna onal credit-ra ng agencies. At year-end, the Group did not consider there to be any signicant concentra on of credit risk. Also refer notes 14 and 16. Liquidity risk management Ul mate responsibility for liquidity risk management rests with the board of directors. The Group manages liquidity risk by maintaining adequate reserves, banking facili es and reserve borrowing facili es, by con nuously monitoring forecast and actual cash ows, and by matching the maturity proles of nancial assets and liabili es.
59

Liquidity risk tables: The following table details the Groups remaining contractual maturity for its nancial assets and liabili es. The tables for assets have been drawn up based on the undiscounted contractual maturi es of the nancial assets including interest that will be earned on those assets. The tables for liabili es represent undiscounted cash ows of nancial liabili es based on the earliest date on which the Group can be required to pay based on the interest rates at the repor ng date: Weighted average interest rate
2012
1 month $
1 - 3 months $
3 months 1 year $
1 - 5 years $
Financial assets Non-interest bearing loans and receivables Financial liabili es Non-interest bearing Variable interest rate instruments Fixed interest rate instruments Total 2011 Financial assets Non-interest bearing loans and receivables Financial liabili es Non-interest bearing Variable interest rate instruments Fixed interest rate instruments Total Interest rate risk The Group is exposed to interest rate risk as en es in the Group borrow funds at both xed and variable interest rates. The risk is managed by the Group by maintaining an appropriate mix between xed and oa ng rate borrowings. The Groups exposures to interest rates on nancial liabili es are detailed below. Interest rate sensi vity analysis: The sensi vity analyses below have been determined based on the exposure to interest rates at the balance sheet date. For oa ng rate liabili es, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point increase or decrease is used when repor ng interest rate risk internally to key management personnel and represents managements assessment of the reasonably possible change in interest rates. If interest rates had been 50 basis points higher and all other variables were held constant, the Groups prot before taxa on for the year ended 31 December 2012 would decrease by $141,146 (2011: $86,049). If interest rates had been 50 basis points higher and all other variables were held constant, the Groups net equity would decrease by $105,295 (2011: $69,614). This is mainly a ributable to the Groups exposure to interest rates on its variable rate borrowings. The increase in the Groups sensi vity to interest rates, is directly a ributable to the new variable interest rate long term debt facili es, oset by the se lements that occurred during the year, as disclosed in note 19. 60
0.00%
16,598,423
8,513,568
858,616
0.00% 4.36% 8.90%
8,912,474 229,156 125,662 9,267,292
5,813,100 38,679 5,851,779
1,520,471 493,022 2,013,493
28,000,000 164,341 28,164,341
0.00%
19,705,652
350,617
149,728
0.00% 5.95% 8.90%
13,024,692 420,247 125,662 13,570,601
814,024 841,730 38,679 1,694,433
659,644 8,800,759 493,022 9,953,425
7,147,123 821,704 7,968,827

29. Related par es
During the year, the Company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase transac ons with related par es of the Group. All transac ons are entered into at amounts nego ated between the par es. Group 2012 $ Management fees received from subsidiaries Rental income received from subsidiaries Service charges paid to Capital Drilling South Africa (Proprietary) Limited Service charges paid to Capital Drilling (Singapore) Pte. Ltd. Informa on technology charges paid to Cap-Sat Technologies Limited Directors' emoluments 1,830,700 2011 $ 1,317,657 2012 $ 364,707 7,275,739 2,583,560 52,736 1,541,100 Company 2011 $ 3,261,173 9,597,161 181,842 1,760,010 66,000 836,161
As at 31 December 2012 and 31 December 2011 there were loans payable to and receivable from the Companys subsidiaries. Details of these loans are disclosed in note 15 and note 22. Included in unearned revenue in accounts payable as at 31 December 2011, is an amount of $282,951 rela ng to drilling services to be provided to Sahar Minerals Limited, a Company which has similar shareholders to the Group. During the year, revenue of $20,357 (2011: $190,691) was generated from transac ons with Sahar Minerals Limited. The remaining unearned revenue balance was se led in cash during the year.
30.
Capital commitments
The Group has the following commitments: Group 2012 $ Commi ed capital expenditure 1,086,560 2011 $ 3,721,000
The Group had outstanding purchase orders amoun ng to $3.7 million (2011: $4.8 million) at the repor ng date.
61

31. Historical summary
Group 2012 $ Opera ng Summary Revenue Gross Prot Gross Prot % Prot from opera ons Prot from opera ons % Deprecia on EBITDA* EBITDA %
* Non-GAAP measure: Earnings before interest, taxa on and deprecia on.
2011 $
2010 $
158,886,956 52,956,512 33.3% 20,949,570 13.2% 16,155,444 37,105,014 23.4%
130,464,797 45,239,500 34.7% 22,847,811 17.5% 11,175,099 34,022,910 26.1%
75,255,976 27,382,353 36.4% 14,176,627 18.8% 5,751,748 19,928,375 26.5%
32.
Subsequent event
In the opinion of the Directors, there has not arisen in the interval between the end of the nancial year and the date of the report any ma er or circumstance that has signicantly aected or may signicantly aect, the Groups opera ons, results or state of aairs in future nancial years, or would result in an adjustment to or disclosure in the nancial statements.
33.
Con ngent liability

Capital Drilling Mauritania SARL is a party to various tax claims by the Director General of Taxa on (Direc on Gnrale de Impts) of Mauritania totalling $785,000. On 16 May 2012 the Company received a tax assessment from the Mauritanian Director General of Taxa on. The tax authori es made certain assump ons based on incorrect informa on obtained from third par es and assessed the company for taxa on based on these assump ons. Payment was made to the Mauritanian Director General of Taxa on on behalf of Capital Drilling Mauritania by a third party. Capital Drilling Mauritania SARL appealed against the assessments. The erroneous recalcula ons by the tax authori es could result in the funds owed to Capital Drilling Mauritania SARL not being recoverable from the Mauritanian Director General of Taxa on. These claims are subject to substan al uncertain es and, therefore, the probability of loss and an es ma on of damages are dicult to ascertain. Consequently, the Group is unable to make a reasonable es mate of the expected nancial eect that will result from the ul mate resolu on of the proceeding. As of 31 December 2012, the Group did not record any provision for the likelihood of not recovering these funds.
62
Corporate Directory
Capital Drilling Limited Bermuda registered number 34477
Registrars
Computshare Investor Services (Jersey) Limited 31 Pier Road, St Helier Jersey JE4 8PW
Registered Office
Cannons Court 22 Victoria Street Hamilton HM12 Bermuda
Auditor
Deloitte & Touche Deloitte Place Building 2, The Woodlands 20 Woodlands Drive, Woodmead, 2052 South Africa
Corporate Office
23 Amoy Street Singapore 069858 Tel: +65-6227 9050 Fax: +65-6227 9089
Bankers
Bank of America 6 Front Street Hamilton HM11. Bermuda Standard Bank (Mauritius) Limited Level 9, Tower A, 1 CyberCity Ebne, Mauritius
Company Secretary
Sherman Tan
Website
Investor Relations
Buchanan 107 Cheapside London EC2V 6DN
www.capdrill.com
Brokers
Liberum Capital Limited Ropemaker Place, Level 12, 25 Ropemaker Street London EC2Y 9LY Canaccord Genuity Limited Cardinal Place, 7th Floor 80 Victoria Street London SW1E 5JL
13
Capital Drilling Limited

Canons Court 22 Victoria Street Hamiliton, HM12
TEL:63278398
Bermuda

2012 Annual Report

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Capital Drilling

ANNUAL REPORT 2012

CAPITAL DRILLING AT A GLANCE

DRILLING TYPES (2012)

Exploration 7% Production 21%

CLIENT TYPES (2012)

Fleet Profile (2012)

Capital Drilling limited Annual Report 2012

Well Positioned for the Future

Capital Drilling limited Annual Report 2012

2012 2011 Change $m $m %

10.5 10.5 69.2 19.8 16.2 20.0 21.4

13.1 13.0 58.8 28.2 21.3 14.6 18.5

-20 -20 +18 -30 -24 +36 +16

Capital Drilling limited Annual Report 2012

17.6 14.1 11.2 7.1

FY10 Revenue (in US$m)

50% 29.1 40% 30% 20% 10%

34.0 26.5 % 21.7% 12.8 19.9 26.1%

40% 35% 30% 25%

20% 15% 10% 5% 0%

FY10 EBITDA (in US$m)

FY12 FY12 EBITDA (%)

Net debt to Equity (%)

NAV Per Share

Return On Total Assets

22.6% 18.3% 15.4% 18.3%

23.5% 21.3% 16.2% 14.8%

FY10 ROIC (%)

NPAT (ROTA (%)

Capital Drilling limited Annual Report 2012

Chairman / Interim CEO Statement

60% 50% 40% 30%

Annual Fleet Growth

Capital Drilling limited Annual Report 2012

Chairman / Interim CEO Statement

Health and Safety

Jamie Boyton Executive Chairman and Interim Chief Executive Officer

Capital Drilling limited Annual Report 2012

Chief Financial Officers Report

Statement of Financial Position

Statement of Comprehensive Income (Summary)

Statement of Financial Position (Summary)

Capital Drilling limited Annual Report 2012

Chief Financial Officers Report

Reconciliation of Cash Position

Treasury and Risk Management

Critical Accounting Policies

Statement of Cash Flow (Summary)

Property, Plant and Equipment

Capital Drilling limited Annual Report 2012

Chief Financial Officers Report

Share Based Payments

Fluctuation in levels of mineral exploration

Business interruptions and weather conditions

Key personnel and staff retention

Capital Drilling limited Annual Report 2012

Chief Financial Officers Report

Going Concern Basis

By order of the Board