35
It may therefore be difficult or impossible for the Group to obtain funding for existing or proposed capital expenditures
on acceptable terms, or at all.
If the Group raises additional debt in the future, it may become more leveraged and subject to additional or more
restrictive financial covenants and ratios, or may be required to extend security over its assets for the benefit of lenders.
See “
—Risks relating to the Group’s financial profile— The Group’s significant leverage may make it difficult for the
Group to service its debt, including the Notes, and operate its business.”
Any inability of the Group to procure sufficient financing for capital expenditures could adversely affect its ability to
expand its business and meet its stated reserve and production targets, could result in the Group facing unexpected costs
and delays in relation to the implementation of its exploration, appraisal and development plans and could adversely
affect the Group’s ability to maintain its production at current levels, meet its commitments under certain of its
exploration or development licences, and achieve its strategy. This could have a material adverse effect on the Group’s
business, prospects, financial condition and results of operations.
The Group could face significant forfeiture of cash, impairment charges, litigation and other costs as a result of its
decision to exit certain jurisdictions.
In order to focus management attention and Group financial resources on its exploration, appraisal and development
assets in the core MENA region, the Group has ceased to pursue new projects in Pakistan and Latvia, and it plans to
spend only the minimum capital expenditures required under its contracts in respect of its asset in Mansuriya in Iraq. The
Group is actively seeking to sell or monetise these assets or otherwise exit certain of these jurisdictions altogether. As a
result, the Group may forfeit its licences in certain of these jurisdictions, reducing the monetary value upon disposal of
certain assets. In preparing its consolidated financial statements, the Group may opt to recognise a provision for any such
forfeiture costs, even prior to agreeing any specific disposal. Upon a disposal, the Group may also incur impairment
losses, which may be significant, if the value of its assets in any of these jurisdictions on the date of disposal is less than
the value recorded in the Group’s consolidated balance sheet for that asset. In relinquishing certain licences or exiting
certain of these jurisdictions, the Group could also face creditor claims, potential litigation if joint venture partners,
government bodies or other stakeholders challenge the Group’s actions, employee claims as the Group attempts to
reduce costs in these jurisdictions prior to disposal, or other costs which may arise. These charges, claims and costs,
individually or in the aggregate, result in substantial additional payments, including in fulfilment of work commitments
under certain licences, and could materially adversely affect the Group’s business, prospects and financial condition.
The Group may be unable to effectively execute its strategy and meet its reserve and production growth targets
through acquisitions or through organic growth.
The oil and gas exploration industry in the jurisdictions in which the Group operates is highly competitive and may
become more competitive in the future. The Group faces significant competition in its efforts to generate new
exploration, appraisal and development opportunities, enter into licences, and identify attractive acquisition
opportunities. The Group seeks to identify suitable investment opportunities that meet its criteria and are compatible with
its strategy yet may not be successful in consummating these transactions on satisfactory terms due to competition from
energy development companies, owner-operators, private equity investors, wealthy individuals and other entities who are
engaged in energy investment activities. Particularly in public rounds of bidding for exploration licences throughout the
jurisdictions in which the Group operates, the Group faces competition from companies with greater funding, more
extensive technical resources, deeper local relationships or significantly larger platforms of staff and equipment. As a
result of these and other factors, the Group’s competitors may be able to submit lower or otherwise more attractive bids
for exploration licences. As a result, the Group may not succeed in obtaining any commercially viable additional oil and
gas assets or prospects at an attractive price, or at all.
In addition, effective and timely pursuit of acquisition opportunities and the ability of the Group to commit to new
exploration, appraisal and development projects will depend in part on whether the Group is able to obtain funding for
such opportunities, including funding from internally generated cash flows, drawing upon its debt facilities, and also
from third-party funding from asset sales, farm out arrangements (including in respect of Block 9 in Iraq), or in the debt
or equity markets. If internally generated cash flows are substantially committed to the Group’s existing commitments
and strategy, and if capacity under existing credit facilities or third-party funding is not available on commercially
attractive terms, or at all, the Group may not be able to act on attractive acquisition or licensing opportunities. See “
—
The Group’s exploration, appraisal and development programmes are capital intensive and the Group will be unable to
implement these programmes and fulfil its licensing commitments without significant capital expenditure for which
funding may not be available
.”
As a result of these or other factors, the Group’s future activities may fail to result in the acquisition of new assets or the
entry into new commercial arrangements at a level that is sufficient to keep pace with the Group’s level of production.
