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In addition, under IFRS, the net capitalised cost of an oil and gas asset may not exceed its recoverable amount, which is
based upon estimated future net cash flows from that asset’s oil and gas reserves. If the net capitalised costs exceed this
limit, the Group will be required to charge the amount of the excess against earnings. If oil or gas prices were to decline,
the net capitalised cost of the Group’s oil and gas assets may approach or exceed their recoverable amount, resulting in a
charge against earnings. While any such charges would not directly affect the Group’s operating cash flows, the charges
to earnings could be viewed unfavourably in the market and could limit the Group’s ability to borrow funds or comply
with covenants contained in current or future credit agreements or other debt instruments, which could result in the delay
of the Group’s exploration, appraisal and development programmes. This could have a material adverse effect on the
Group’s business, prospects, results of operation and financial condition.
The Group’s exploration, appraisal and development programmes may be subject to delay as a result of shortages of
appropriate drilling rigs and other related equipment.
Oil and gas exploration, appraisal and development activities are dependent on the availability of drilling rigs and related
equipment and the provision of third party services in the locations where these activities will be conducted. The Group
contracts or leases services and equipment from third party providers and suppliers in most of its jurisdictions of
operations. This equipment and these services may not be readily available at the times and places required according to
the Group’s exploration, appraisal and development programme, or according to the terms of its licences. The Group
does not currently hold long-term contracts for the continued use of drilling rigs and other necessary equipment, and is
therefore subject to the risk that contracts for critical equipment may not be renewed upon expiry, or may be renewed at
commercially unfavourable terms. A high level of market demand for scarce items of equipment may affect the
availability of such equipment to the Group and may delay its exploration, appraisal and development activities. Even if
drilling rigs and other necessary equipment can be obtained, significantly increased operating costs may outweigh the
operational benefits. In addition, the costs of third party equipment have increased significantly over recent years and
may continue to rise. If the Group is unable to agree to a commercially viable contract with a third party provider or
supplier for key equipment, it may have a material adverse impact on the Group’s business, prospects, financial
condition and results of operations.
The Group may be unable to obtain the services of skilled third party contractors.
The Group relies on third party independent contractors to carry out various operational tasks in its exploration, appraisal
and development operations, including carrying out drilling activities, delivering hydrocarbons to counterparties and
maintaining the Group’s assets and infrastructure. Some of the services required for the Group’s operations and
developments are currently only available on commercially reasonable terms from a limited number of key providers in
each of the Group’s operating jurisdictions.
As a result, the Group relies on third party contractors performing satisfactorily and fulfilling their obligations. Any
failure by a third party contractor, or a violation of the Group’s various licensing obligations by a contractor working on
the Group’s behalf, may lead to delays or curtailment of the production, transportation and delivery of the Group’s
hydrocarbons. In addition, the costs of third party contractors may increase, in particular during periods of high prices for
hydrocarbons, leading to higher expense levels which the Group may be unable to match with corresponding revenue
increases. Any dispute with, or failure in performance by, third party service providers, external contractors or
consultants and associated increases in operating costs or inability on the part of the Group to find adequate replacement
services on a timely basis, if at all, could result in delays or curtailment of the production, transportation and delivery of
the Group’s hydrocarbons, which in turn could have a material adverse effect on the Group’s business, prospects,
financial condition and results of operations.
There is also a risk that third party contractors may not operate in accordance with the Group’s health, safety or
environmental standards or other policies, including anti-corruption and anti-bribery policies, and that the Group could
incur significant regulatory penalties or forfeit key licences as a result, which in turn could have a material adverse effect
on the Group’s business, prospects, financial condition and results of operations.
The Group could suffer unexpected costs or other losses, or fail to capitalise on new commercial opportunities, if its
JV partners and counterparties do not perform or comply with licence terms and applicable regulations, or if the
Group and its JV partners fail to co-operate.
Although the Group maintains significant day-to-day control as the operator of the majority of its assets, it does not
operate certain of its assets, including its Mansuriya asset in Iraq and its ERQ asset in Egypt, and it may suffer
unexpected costs or other losses if any counterparty to any contractual arrangement does not meet its obligations under
such arrangements. In particular, the Group cannot control the actions or omissions of its JV partners under its PSCs.
The Group is jointly and severally liable for the obligations of former and current JV partners under certain of its PSCs.
If such JV partners breach the terms of the PSCs or any other contractual arrangements relating to their interests, the
Group may face liability for such breach even if the Group is not at fault. Any such breach of a PSC or other significant
