Annual Report 2011 - PGS
Annual Report 2011 - PGS Annual Report 2011 - PGS
Notes to the consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table shows the gross amounts of debt with fixed and variable interest (including finance lease obligations): December 31, (In thousands of dollars) 2011 2010 Debt at fixed interest rate 483,785 319,633 Debt at variable interest rate (a) 470,533 470,533 Total interest bearing debt 954,318 790,166 (a) Interest based on US dollar LIBOR plus a margin. The weighted average interest rate on the variable rate debt, inclusive finance leases, as of December 31, 2011 and 2010 was approximately 2.3% and 2.1%, respectively. As indicated above, through interest rate swaps the Company have effectively fixed the interest rate on $300 million of this floating rate debt as of December 31, 2011, with the remaining $170.5 million of the floating rate debt continuing to bear interest at a variable rate. As of December 31, 2010, the Company had fixed the interest rate on $300 million through interest rate swaps, with the remaining $170.5 million continuing to bear interest at a variable rate. After giving effect to the Company’s interest rate swaps, for every one-percentage point hypothetical increase in LIBOR, our annual net interest expense on our variable rate debt, inclusive finance leases and cash holdings, will decrease by approximately $1.0 million and increase by approximately $2.6 million at December 31, 2011 and 2010, respectively. Interest rate hedge accounting As of December 31, 2011 100% out of the total notional amount of interest rate swaps of $500 million were accounted for as cash flow hedges (100% out of the total notional amount of interest rate swaps of $300 million as of December 31, 2010). In the years ended December 31, 2011 and 2010, the fair value of these instruments were recorded in the consolidated statement of comprehensive income as the effective portion of the designated and qualifying hedging instrument. Changes in the fair value of interest swaps contracts designated as cash flow hedges are as follows (recognized in the consolidated statement of comprehensive income): Years ended December 31, (In thousands of dollars) 2011 2010 Amounts transferred from the consolidated statement of comprehensive income to the consolidated statement of operations 14,734 18,288 Effective portion of fair value recognised in the consolidated statement of comprehensive income (12,152) (15,587) Total change in fair value (loss) 2,582 2,701 The Company has not excluded any components of the derivative instruments’ gain or loss from the assessment of hedge effectiveness with respect to the qualifying interest rate hedges. The following table indicates the periods in which the cash flow associated with derivatives, which are cash flow hedges, are expected to occur: Notional amount Discounted carrying amount Total expected cash flow (gross) Cash flow matures in,
Notes to the consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Foreign exchange rate exposure The Company is exposed to currency fluctuation due to a predominantly USD based revenue stream, while the Company’s expenses are incurred in various currencies. The larger expense currencies other than the USD are GBP, NOK and EUR. The Company maintain a foreign-currency risk management strategy that uses foreign currency exchange contracts to protect against fluctuations in cash flow caused by volatility in currency exchange rates. In 2011, the Company continued a foreign currency hedging program by entering into NOK, GBP, SGD, EUR, and BRL on forward contracts. As of December 31, 2011, the Company had open forward contracts to buy and sell GBP, NOK, BRL and EUR amounting to approximately $139.5 million (notional amount) with a negative fair value of $4.6 million. As of December 31, 2010, the Company had open forward contracts to buy and sell GBP, NOK, SGD, BRL and EUR amounting to approximately $240.5 million (notional amount) with a negative fair value of $0.1 million. The following table indicates the maturity analysis of the derivates foreign currency forward contracts as at reporting date: Total expected cash flow Notional Carrying Matures in (In thousands of dollars) amount amount Gross
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Notes to the consolidated financial statements<br />
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS<br />
The following table shows the gross amounts of debt with fixed and variable interest (including finance lease obligations):<br />
December 31,<br />
(In thousands of dollars) <strong>2011</strong> 2010<br />
Debt at fixed interest rate 483,785 319,633<br />
Debt at variable interest rate (a) 470,533 470,533<br />
Total interest bearing debt 954,318 790,166<br />
(a) Interest based on US dollar LIBOR plus a margin.<br />
The weighted average interest rate on the variable rate debt, inclusive finance leases, as of December 31, <strong>2011</strong> and 2010 was<br />
approximately 2.3% and 2.1%, respectively. As indicated above, through interest rate swaps the Company have effectively fixed<br />
the interest rate on $300 million of this floating rate debt as of December 31, <strong>2011</strong>, with the remaining $170.5 million of the<br />
floating rate debt continuing to bear interest at a variable rate. As of December 31, 2010, the Company had fixed the interest<br />
rate on $300 million through interest rate swaps, with the remaining $170.5 million continuing to bear interest at a variable rate.<br />
After giving effect to the Company’s interest rate swaps, for every one-percentage point hypothetical increase in LIBOR, our<br />
annual net interest expense on our variable rate debt, inclusive finance leases and cash holdings, will decrease by<br />
approximately $1.0 million and increase by approximately $2.6 million at December 31, <strong>2011</strong> and 2010, respectively.<br />
Interest rate hedge accounting<br />
As of December 31, <strong>2011</strong> 100% out of the total notional amount of interest rate swaps of $500 million were accounted for as<br />
cash flow hedges (100% out of the total notional amount of interest rate swaps of $300 million as of December 31, 2010). In the<br />
years ended December 31, <strong>2011</strong> and 2010, the fair value of these instruments were recorded in the consolidated statement of<br />
comprehensive income as the effective portion of the designated and qualifying hedging instrument.<br />
Changes in the fair value of interest swaps contracts designated as cash flow hedges are as follows (recognized in the<br />
consolidated statement of comprehensive income):<br />
Years ended<br />
December 31,<br />
(In thousands of dollars) <strong>2011</strong> 2010<br />
Amounts transferred from the consolidated statement of comprehensive income to the<br />
consolidated statement of operations 14,734 18,288<br />
Effective portion of fair value recognised in the consolidated statement of comprehensive income (12,152) (15,587)<br />
Total change in fair value (loss) 2,582 2,701<br />
The Company has not excluded any components of the derivative instruments’ gain or loss from the assessment of hedge<br />
effectiveness with respect to the qualifying interest rate hedges.<br />
The following table indicates the periods in which the cash flow associated with derivatives, which are cash flow hedges, are<br />
expected to occur:<br />
Notional<br />
amount<br />
Discounted<br />
carrying<br />
amount<br />
Total<br />
expected<br />
cash<br />
flow<br />
(gross)<br />
Cash flow matures in,<br />
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