Risk Management Policy

Introduction

Cooper Energy is an oil and gas exploration and production company. Its right to operate and its reputation in the oil and gas industry wholly depends upon its adherence to the prevailing laws, regulations and technical and societal standards.

In addition to the prevailing laws, regulations and technical and societal standards, Cooper Energy’s values state that it has a focussed obligation to “control and reduce costs and … manage the risks inherent to its business”. This value coupled with individual leadership and accountability empowers us all to live and promote our Risk Management Policy.

We are committed to ensuring that we plan and perform our business activities to ensure that the risks inherent in our business are identified and then avoided or kept as low as reasonably practicable.

We will strive to identify and manage the risks inherent in our business and we will continuously seek to improve our risk management performance so that we can protect our people, the environment, our assets and our reputation.

Policy

The Board of Directors of Cooper Energy Limited has adopted a Risk Management Policy.

The Board as a whole accepts the task of identification of significant areas of business and operational risk and implementation of procedures to manage such risks.

The Board monitors the operational and financial performance of the Company against budget and other key performance measures. The Board, in conjunction with management and appropriate consultants, also reviews and receives advice on areas of operational and financial risks.

The Board acknowledges that it is responsible for the overall internal control framework but recognises that no cost effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated a control framework that can be described as follows:

(a) Financial reporting – Cooper Energy reports to the ASX yearly, half-yearly and quarterly. Procedures are also in place to ensure that price sensitive information is reported to ASX in accordance with continuous disclosure requirements;

(b) Operations review – The Managing Director reports on these matters, using an exception reporting basis, to the Board, and

(c) Standard Agenda Item – Risk Management Overview will form part of the Managing Director’s Report to each Board meeting and be a standing item on the Board Agenda. The following is a summary of the current areas of risk and management strategies the Company has in place:

1. Financial

1.1 Internal Controls

The Company’s financial status is not complex. To date equity funds have been raised and utilized for exploration and production projects.

All major project expenditure must first be approved by the Board.

1.2 Insurance

The Company maintains a comprehensive suite of insurance including the following:

• General insurance for office assets and public liability;
• Workers’ compensation ;
• Travel insurance;
• Directors and officers indemnity; and
• Control of Well and Liability.

Insurances are reviewed on a semi–annual basis.

1.3 IT

The Company’s computer systems are regularly backed up for maintenance of electronic records.

2. Operational

2.1 Operational

Risk Management is dealt with on a project by project basis and where required external consultants are engaged to report.

2.2 Safety

Safety is an item addressed by the Managing Director.

2.3 Petroleum Exploration Licence Management

The Managing Director is responsible for timely management of matters pertaining to petroleum exploration licences.

3. Organisational

3.1 Given the speculative nature of the Company’s business it is subject to general risks and certain specific risks. A summary of the major risk factors are set out in the Company’s prospectus dated 31 January 2002. These risk factors are still relevant to the Company.

Implementation

To ensure the implementation of this policy Cooper Energy will:

• Comply with all prevailing laws, regulations and standards whilst aspiring to higher standards.
• Ensure adequate risk management is undertaken for all our business activities.
• Delay or stop activities where risk identification has not been undertaken.
• Ensure that all our activities are conducted in a safe and efficient manner and risks are avoided or are kept as low as reasonably practicable.
• Apply best oil field standards where laws and regulations do not exist.
• Ensure that all staff and contractors are trained and suitably supervised so that they can perform their jobs.
• Ensure that procedures are in place to identify, assess and control workplace hazards.
• Use our influence to promote this policy in non-operated ventures.
• Promote our values and culture so that all employees will act in accordance with this policy.

Review of Risk Management

The Audit Committee will review the adequacy and effectiveness of the Company’s risk management framework and assist the Board with regard to oversight of the Company’s risk management by gaining assurance that all major identified risks are being adequately managed.

Application

The Managing Director is accountable to the Board of Directors for ensuring that this policy is implemented. This policy will be reviewed on a yearly basis.

This Policy applies to all staff, contractors and joint venturers engaged in activities under Cooper Energy’s operational control.