HispanicBusiness

The Company is exposed to fluctuations in the value of cash, accounts receivable, short-term investments, accounts payable and accrued liabilities due to changes in foreign exchange rates as these financial instruments are partially or wholly denominated in Canadian dollars and the local currencies of the countries in which it operate. The Company manages the risk by converting cash held in foreign currencies to U.S. dollars as required to fund forecasted expenditures. The Company is exposed to changes in foreign exchange rates as the future interest and principal amounts on the convertible notes are in Canadian dollars.

The Company is exposed to changes in the market value of the short-term investments.

The Company is exposed to credit risk with respect to all of its financial instruments if a customer or counterparty fails to meet its contractual obligations. The Company has deposited cash and restricted cash with reputable financial institutions, for which management believes the risk of loss to be remote. The Company takes measures in order to mitigate any risk of loss with respect to the accounts receivable, which may include obtaining guarantees.

The Company is exposed to the risk of changes in market prices of commodities. The Company enters into physical commodity contracts for the sale of natural gas, which partially mitigates this risk. The Company does so in the normal course of business by entering into contracts with fixed natural gas prices. The contracts are not classified as financial instruments because the Company expects to deliver all required volumes under the contracts. No amounts are recognized in the consolidated financial statements related to the contracts until such time as the associated volumes are delivered. The Company is exposed to the changes in the Brent crude price as the average Brent crude price from the preceding year (to a defined maximum) is a variable in the natural gas price for the current year, calculated annually, for the D6 Block natural gas contracts.

The fair values of accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to their short periods to maturity. The fair value of the short-term investments is based on publicly quoted market values. The fair value of the long-term investments is based on their historical cost as they are not traded on publicly quoted markets.

The fair value of the borrowings approximates its carrying value due to the nature of the borrowings. Interest expense on the borrowings of $1 million and $3 million was recorded for the three and nine months ended December 31, 2012.

The debt component of the convertible notes has been recorded net of the fair value of the conversion feature. The fair value of the conversion feature of the notes included in shareholders' equity at the date of issue was $31 million ($24 million net of a deferred tax recovery). The fair value of the conversion feature of the debentures was determined based on the discounted future payments using a discount rate of a similar financial instrument without a conversion feature compared to the fixed rate of interest on the notes. Interest and financing expense of $5 million and $16 million for the three and nine months ended December 31, 2012 were recorded for interest expense and accretion of the discount on the convertible notes and debentures.

LIQUIDITY AND CAPITAL RESOURCES

In January 2012, the Company entered into a three-year facility agreement for a $225 million revolving credit facility and a $25 million operating facility for general corporate purposes. The maximum available credit under this agreement is subject to review based on, among other things, updates to the Company's reserves. In September, 2012, the syndicate of lenders confirmed a revised borrowing base amount under the facility to an aggregate of $100 million. The Company understands that the revised borrowing base was determined assuming that the price for gas sales from the D6 Block in India would remain unchanged at $4.20 per MMBtu for the life of the gas reserves. The Government of India is currently reviewing a new pricing mechanism for domestic gas produced in India that, if approved, would result in a significant increase in the price for the D6 Block natural gas sales contracts that expire on March 31, 2014. When a new price formula is approved, the Company will exercise its contractual right to have the borrowing base of the facility reviewed. Further, if contingent resources are converted to reserves, the Company will exercise its right to request a further borrowing base review. The Company has borrowed $90 million against this facility as of December 31, 2012.