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KUWAIT ENERGY PLC
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
Six months ended 30 June 2015
17
8.
PROPERTY PLANT AND EQUIPMENT (CONTINUED)
Yemen – Block 5
The Block 5 Production Sharing Agreement (PSA) expired on 8 June 2015 however as a result of lost production days,
mainly due to disruptions to the main oil export pipeline in Yemen, the Group has filed a number of notices of force
majeure to the Yemeni Government, represented by YICOM. YICOM has granted a license extension of 400 days to
settle force majeure claims prior to 19 March 2015. Post 19 March 2015, production was shut in from 6 April 2015 due
to tankers being unable to enter the port and export the oil due to the political and security situation. In addition to the
agreed 400 days the Group filed for additional days of force majeure suffered from 19 March 2015 to commence after
the date of resuming production. The Yemeni Government has neither refused nor agreed to the Group’s additional force
majeure days as of the date of approval of these condensed consolidated financial statements.
The Group has prepared an impairment test that assumes production commences on 1 January 2016, that the Group will
be compensated for 670 days of lost production for the period of shut in post 19 March to 31 December 2015, and that
the PSA will expire on 1 November 2017. The 670 days of lost production includes 400 days of force majeure agreed by
YICOM, 72 days additional force majeure claimed to 8 June 2015 and 198 days of compensating production to the
assumed startup date of 1 January 2016.
If the Group is unable to obtain the additional days of lost production accumulated post 8 June 2015 from the Yemeni
government, the Group will lose up to 198 days of anticipated production from Block 5 which would trigger an
impairment charge of up to USD 11,800 thousand. No such impairment charge has been recorded as the Group believes
additional force majeure days will be granted by the Yemeni Government. Non-Yemeni employees have been withdrawn
for their safety and security and the Sana’a office is currently closed, however the Block 5 field facility remains available
for the use of the Group and essential Yemeni employees remain on site.
Iraq - Mansuriya
At 30 June 2015 the Group held property, plant and equipment with a carrying value of USD 27,851 thousand in relation
to the Mansuriya field located in North East Iraq where in 2014, the political and security situation became unstable. On-
site operations at the Mansuriya field have been put on hold, however, management believes that in the longer term the
situation will be resolved and that no impairment is required.
9.
INVESTMENT IN JOINT VENTURE
30 June
31 December
2015
Audited
2014
Audited
USD 000’s
USD 000’s
As at 1 January
8,138
10,598
Share of profit of Medco
1,731
1,040
Dividend received from Medco
(2,000)
(3,500)
As at 30 June/ 31 December
7,869
8,138
The Investment in Joint Venture represents a 20% equity interest in Medco L.L.C. (“Medco”), a jointly controlled entity
incorporated in Oman, engaged as operator for Karim Small fields (“KSF”) in Oman and are entitled to a 75% working
interest in production. On 28 April 2015, Medco signed a new 25 year service contract for KSF, commencing on 1
st
June
2015. The Group has provided a bank guarantee of USD 7.5 million to perform obligations under the new service
contract (see note 11).