8
Gas Master Plan. Under the framework of the MoU, the Group is to advise the Ministry on the most suitable uses and
applications for the country’s gas resources in order to ensure production sustainability and maximise revenue generation
and job creation. In accordance with the MoU, the Yemen Gas Master Plan was completed in April 2011 and submitted
to the PEPA in Yemen. As part of phase one of the plan, the Group is seeking approval from the Yemen Government to
proceed with a small scale liquefied natural gas project. The Group also maintains strategic relationships in countries in
the broader MENA region where it does not currently have a presence, such as Somalia, Libya and Afghanistan, which
are jurisdictions into which the Group would consider expanding its operations should a favourable opportunity arise.
The Group’s strategic relationships help to strengthen its knowledge of the local oil and gas industries, and assist the
Group in gaining access to and competing effectively for new investment opportunities.
The Group also adopts a cooperative approach in its relationships and dealings with local stakeholders, including local
governments, members of the civil service and others, by seeking to conduct its operations in ways that are tailored to the
countries in which it operates. The Group recruits employees locally whenever possible, and has a programme of
corporate social responsibility initiatives to engage with and support local communities. For example, the Group has
been involved in constructing and repairing local roads, hospitals, schools, and sewage and water supply systems, and in
providing heating and gas supply for schools and villages in Iraq, Egypt, Yemen, Russia and, prior to disposal of the
Group’s assets there, Ukraine. The Group actively supports projects providing for disabled women and children in Egypt
and micro-financing to assist internally displaced persons in Iraq. This cooperative and locally-adaptive approach has
helped the Group to position itself as a trusted partner to local stakeholders.
All of the above elements have contributed to establishing the Group’s network of stakeholder relationships across the
core MENA region, and have helped the Group access new oil and gas opportunities. For example, the Group enjoys the
position of currently being one of the few regional independent oil and gas companies to be present in southern Iraq, in
its Siba and Block 9 assets.
Track record of growth in reserves and production in the MENA region while maintaining effective cost control
The Group has rapidly grown its overall MENA reserve base since inception with 2P working interest reserves
increasing from 18.1 mmboe as at 31 December 2008 to 165.7 mmboe as at 31 May 2014 and 2P net entitlement
reserves increasing from 6.1 mmboe as at 31 December 2008 to 37.0 mmboe as at 31 May 2014. This growth has been
mainly driven by the Group’s expansion in the core MENA region, namely its being awarded the Siba and Mansuriya
licences in Iraq, as well as exploration, appraisal and development success in Egypt, which resulted in the Group’s
Egyptian 2P working interest reserves increasing from 17.8 mmboe as at 31 December 2008 to 27.9 mmboe as at 31 May
2014 and its Egyptian 2P net entitlement reserves increasing from 5.8 mmboe as at 31 December 2008 to 10.3 mmboe as
at 31 May 2014, net of production over this period. The Group’s average daily hydrocarbon production (oil, gas sales
and condensate) on a working interest basis has grown more than thirty times since 2006, from 680 boepd in 2006 to
22,468 boepd in the first three months of 2014. As a result of the growth in the Group’s oil and gas production, operating
cash flow before changes in working capital has increased from $1.4 million in 2006 to $189.9 million in 2013,
representing a CAGR of 101.7%. The Group’s profit for the period from continuing operations has increased from $1.0
million in 2006 to $20.2 million in 2013, representing a CAGR of 54%. The Group’s positive operating cash flows have
helped to fund its exploration, appraisal and development programme, as well as growth through selective acquisitions.
The table below shows the evolution of the Group’s 2P reserves by region on a working interest basis since 2008.
2008
(1)
2009
2010
2011
2012
2013
(mmboe)
Location
Egypt...........................
17.8
19.9
20.9
33.1
28.1
28.4
Iraq..............................
-
-
-
139.7
134.3
132.5
Yemen.........................
0.3
0.4
0.7
0.7
7.3
5.6
Total
...........................
18.1
20.3
21.6
173.4
169.7
166.5
(1)
Unaudited numbers based on the Group’s internal estimates.
The Group’s rapid growth, and its ability to convert resources into reserves, is attributable to the success of its
management and technical teams, which have technical and operational knowledge and expertise as a result of their
extensive experience with the geological and subsurface conditions in the core MENA region, based on a long history of
