32
activities. In particular, the Group’s service contracts in Iraq and other jurisdictions may not provide the legal right to
extract hydrocarbons to the degree necessary for the Group to recognise reserves from those fields, notwithstanding that
SPE-PRMS standards permit the Group to do so. As a result of these and other factors, if other standards were applied,
the Group’s estimated reserve levels may be substantially lower than those currently reported in this Offering
Memorandum. Prospective investors should read the CPR for more information on the Group’s reserves and resources
and the reserves and the related definitions used by the Group.
The Group may not be able to develop commercially its contingent and prospective resources, which are only
estimates of potentially recoverable hydrocarbons.
GCA reports that, as at 31 May 2014, the Group had working interest 2C contingent resources of 729.9 mmbbl of oil,
699.2 Bscf (116.5 mmboe) of gas and 3.9 mmbbl of condensate, which consist of resources that have not matured to the
point where they can be considered commercially recoverable and thus categorised as reserves. In addition, GCA reports
that the Group has numerous prospective resources, which consist of potentially oil, gas and condensate from
accumulations yet to be discovered. Estimates of the Group’s prospective resources are set forth in the “
Competent
Person’s Report
” in this Offering Memorandum. Both contingent and prospective resources are therefore inherently
speculative, and the volumes of both contingent and prospective resources presented in this Offering Memorandum are
based upon assumptions which may prove to be materially incorrect. Unless otherwise indicated, GCA has, in compiling
the CPR, used the definitions and guidelines set out in the SPE-PRMS. Under the SPE-PRMS, contingent resources are
those deposits that are estimated, on a given date, to be potentially recoverable from known accumulations but that are
not currently considered to be commercially recoverable. Accordingly, SPE-PRMS recognises that contingent resources
are by their nature uncertain in respect of their commercial maturity and inferred volume range. Contingent resources are
presented as “unrisked” in the sense that estimates of contingent resources do not reflect economic uncertainty and
commerciality. These contingent resources may not be considered commercially recoverable by the Group for a variety
of reasons, including the high costs involved in recovering contingent resources, the price of oil at the time, the
availability of the Group’s personnel, equipment and funding, and other development plans that the Group may have. By
contrast, prospective resources are those deposits that are estimated, on a given date, to be potentially recoverable from
accumulations yet to be discovered, and are therefore speculative in respect of their inferred presence and uncertain in
respect of their inferred volume range. Prospective resources may fail to be discovered, and even if discovered may not
be found in sufficient quantities so as to be commercially recoverable by the Group. Estimates of “chance of success” for
prospective resources take into account only the estimated probability that those prospective resources will achieve the
status of a contingent resource (where the geological chance of success is considered to be 100%). Estimates of “chance
of success” for prospective resources do not reflect economic uncertainty or commerciality.
Volumes associated with contingent and prospective resources contained in this Offering Memorandum should be
considered highly speculative. The probability that contingent and prospective resources will be produced and sold is
considerably lower than that for the Group’s reserves. Volumes associated with contingent and prospective resources
contained in this Offering Memorandum should therefore be considered highly speculative. The Group’s estimates of its
contingent and prospective resources are uncertain and can change with time, and there can be no assurance that the
Group will be able to discover or develop any of these resources commercially. As a result, potential investors should not
place undue reliance on the forward-looking statements contained in this Offering Memorandum and in the CPR
concerning the Group’s resources and their role in the Group’s production profiles and exploration, appraisal and
development programmes. If the Group is unable to discover and commercially develop its contingent and prospective
resources this could have a material adverse effect on the Group’s business, prospects, financial condition and results of
operations.
The Group’s exploration and appraisal plans may fail, and as a result the Group may be unable to replace those
hydrocarbons extracted from the Group’s assets, or recover certain costs.
The maintenance of the Group’s existing level of oil and gas reserves, and any future growth in those reserves, are
dependent on the Group discovering or acquiring additional reserves and resources, and on the Group’s ability to convert
resources to reserves. In particular, the success of the Group’s strategy depends on its ability to identify and
commercially exploit new discoveries of oil and gas. Without any further discovery or acquisition of reserves or
resources, the Group’s total reserves and resources will decline over time as current reserves and resources are developed
and produced. Future increases in the Group’s reserves will depend not only on its ability to appraise, develop and
explore its existing assets but also on its ability to select and acquire suitable additional assets either through awards at
licensing rounds or through acquisitions. The success of the Group’s exploration and appraisal plans is subject to, in
particular, the risks and uncertainties of the geological conditions which underlie the Group’s most significant
exploration prospects, in particular Block 9 in Iraq. These and certain other areas being explored by the Group have a
number of prospects for the discovery of oil and gas, and in certain cases have substantial prospective resources, but if
the drilling in a particular geographic area results in a dry well with no flow of oil or gas, the Group may be required to
re-examine its assumptions with regard to reserve and resource levels, future production, return on investment, and the
net present value of the relevant asset and perhaps also from other assets within the same geological basin. If the Group’s
