13
Results of operations for the six months ended 30 June 2014
The Group has not yet finalized its financial statements in respect of the six months ended 30 June 2014. Based on
currently available information, the Group expects that revenue for the six months ended 30 June 2014 will be similar to
revenue for the three months ended 31 March 2014 due to increased production from Egypt, offset by production
decreases due to the Yemen shutdowns in Block 5 and Block 43. In all other respects, the Group anticipates that its
results for the six months ended 30 June 2014 will be generally in line with trends for the three months ending 31 March
2014.
In the second quarter of 2014, the Group received further payments from EGPC in April 2014 and May 2014, resulting
in receipt of total cash payments of $69.9 million against amounts owed by EGPC, and further decreasing the average
months of arrears from EGPC to the Issuer to 6 months and the total amount of receivables due to the Group from EGPC
to $124.4 million as at 30 June 2014. The Group received an additional cargo payment of $26.4 million on 9 July 2014.
Exploration and development programme
Recent developments in the Group’s exploration and development programmes include the following:
•
Block 9 (Iraq)
: The first exploration well in the block, for which drilling commenced in March 2014, has
reached a depth of 2,720m and is expected shortly to enter the Mishref formation, one of two formations
targeted. Under the terms of the exploration, development and service contract for Block 9, the Group is
required to drill on exploration well to a minimum depth of 4,500m, or 500m below the top of the Sulaiy
formation.
•
Siba (Iraq)
: On 17 May 2014, the Group commenced a programme to drill seven appraisal/development wells
by the end of 2016. The Group’s activities in Siba are focused primarily on commencing commercial
production, with the aim of achieving a daily average production rate of 50 mmscfd by July 2015 and 100
mmscfd by the end of 2015. The Group also recently entered a contract with UOP LLC, a subsidiary of
Honeywell (“
UOP
”), for the supply of equipment for a central gas processing facility for the Siba field, which
will have the capacity to process 100 mmscfd.
Disposals and farm out arrangements
On 30 April 2014, the Group completed the sale of its Ukraine assets to Zoynel Limited, a Cypriot investment group, for
total cash consideration of $18.2 million, of which $13.2 million was used to settle existing liabilities of Kuwait Energy
Ukraine LLC and $5.0 million was paid in cash.
On 16 July 2014, KEC Kuwait signed a farm out agreement to assign to EGPC a 10% working interest share in the
Block 9 exploration, development and production service contract, with an effective date of 1 July 2013. This assignment
is subject to certain conditions precedent, including KEC Kuwait providing a written waiver or other evidence of non-
exercise of any preferential rights (including a right of first refusal to acquire the working interest subject to this
proposed farm out) by other parties to the service contract and written approval of the assignment by the Iraqi
government. Upon the completion of this farm out arrangement, the proportion of the Block 9 contingent resources in the
CPR that are attributable to the Group will be reduced accordingly. See “
Risk Factors—Risks relating to the Group—The
economic valuations contained in the CPR may not provide an accurate estimate of the value of the Group or its assets
.”
On 17 July 2014, the operator under the Mansuriya gas development and production service contract issued a notice of
force majeure on behalf of itself and the other JV partners (including the Group) to the Iraqi state-owned oil company
that is the JV’s counterparty under the contract, as a result of the recent security situation in the vicinity of the Mansuriya
contract area. The JV has ceased its operations in the Mansuriya contract area until the force majeure conditions abate.
See “
Risk Factors – Risks relating to the jurisdictions in which we operate – The Group expects a substantial amount of
its future activity to focus on Iraq, which presents a high-risk operational and security environment
.”
The Group is engaged in active negotiations in respect of the sale of its assets in Russia and expects to complete the sale
during the third quarter of 2014.
The Issuer
The Issuer was incorporated under the name Kuwait Energy Limited on 12 October 2010 under the Jersey Companies
Law as a private company limited by shares and registered in Jersey with number 106699. On 12 September 2011, it was
re-registered as a public limited company and changed its name to Kuwait Energy Plc. The registered office of the Issuer
is at Queensway House, Hilgrove Street, St. Helier, Jersey JE1 1ES (telephone number +44 (0)1534 281 837).
