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Under the conditions of the Iraq government’s approval of the 2011 Restructuring, KEC Kuwait is required to become a
subsidiary of the Issuer and to take ownership of Kuwait Energy Iraq Ltd, the Group entity which is party to the Group’s
licence interests in Siba and Mansuriya in Iraq. If the KEC Kuwait Restructuring is challenged or unwound, the Group’s
licences in respect of all of the Group’s Iraq assets could become subject to challenge, suspension or cancellation.
The Group may not be able to integrate any future acquisitions, and any such acquisitions may fail to provide the
anticipated benefits.
As part of its strategy, the Group may from time to time make substantial acquisitions of oil and gas interests, which may
include oil and gas assets, companies or businesses. The integration of those assets, companies or businesses and their
operations, technologies and employees may expose the Group to operating difficulties and expenditure associated with
the retention of key employees, legal contingencies and risks related to the acquired business, and the maintenance and
integration of procedures, controls and quality standards. As a result of these or other factors, the Group may not be able
to achieve the anticipated benefits from any acquisition or investment, and the consideration paid for an acquisition or
investment may also affect the Group’s financial results.
Such acquisitions and investments could also divert management’s time and focus from operating the Group’s business.
The financing of acquisitions or investments in other companies may require the Group to use a substantial portion of its
available cash, to raise debt, which would increase the Group’s interest expense, or to issue shares or other rights to
purchase shares, which may result in dilution to existing shareholders and decrease the Group’s earnings per share.
Moreover, acquisitions may result in write-offs and restructuring charges as well as in creation of goodwill and other
intangible assets that are subject to an impairment test, which could result in future impairment charges. All of these
factors could materially adversely affect the Group’s business, prospects, financial condition and results of operations.
The Group’s rapid growth and expansion may place significant demands on its management and infrastructure,
which may restrict the Group’s ability to successfully execute its strategy.
The Group has experienced significant growth over a short period of time and expects to continue to grow in the future.
This rapid growth in a relatively short period of time has placed, and may continue to place, significant demands and
strains on the Group’s systems, internal controls and senior management. Management of this expected growth requires,
among other things:
•
the continued development of financial and management controls and information technology systems;
•
implementation of additional or updated internal controls, including financial and other reporting procedures;
•
effective co-ordination among management, logistical, technical and finance teams;
•
personnel training and hiring of new personnel; and
•
continued access to financing.
If the Group is unable to successfully integrate new personnel or systems, or otherwise fails to successfully manage its
growth, it could experience a material adverse effect on its business, prospects, financial condition and results of
operations.
Risks relating to the oil and gas industry
Deterioration in global economic conditions could adversely affect the market price of oil and gas.
Crude oil sales have historically accounted for substantially all of the Group’s revenue, and sales of crude oil, natural gas
and condensate will constitute the Group’s primary sources of revenue going forward. Global oil and gas prices are
affected by global supply and demand, particularly in the United States, Europe and Asia (notably China), as well as
trading activities by market participants and others either seeking to secure access to oil and gas or to hedge against
commercial risks, or as part of investment portfolio activity. Historically, oil and gas prices have been highly correlated
with global economic activity and Gross Domestic Product (“
GDP
”) growth, and as a result are, and will likely continue
to be, subject to substantial and unpredictable volatility. In particular, financial markets have faced significant volatility
and liquidity constraints since the summer of 2008. Since 2010, concerns about sovereign debt, in particular in the
European Union, have further disrupted global capital markets. These and other events have had a significant adverse
effect on the global economy and on financial and commodities markets in particular. If global economic conditions
remain weak over the medium to long term or are subject to a further downturn, the global demand for hydrocarbons
may decline, resulting in an adverse effect on the Group’s ability to maintain or grow its revenues. If oil and gas prices
