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licence by one of the Group’s JV partners could cause the relevant governmental authority to revoke, terminate, suspend
or adversely amend the Group’s licences, which could in turn have a material adverse effect on the business, prospects,
financial condition and results of operations of the Group. In addition, where the Group is the operator of an asset, its
partners will have consultation and voting rights in relation to significant and/or operational matters, or, in some cases,
the Group's operatorship may not be governed by a concluded joint operating agreement. In such cases, approval of
significant and/or operational matters may not be forthcoming in a timely manner which could in turn result in
significant delays, losses, liabilities or increased costs to the Group, or the loss of potential growth in production or
reserves.
In certain cases the Group, when acting as operator, may face additional costs above and beyond its contractually defined
role, if one or more of its JV partners are unable or unwilling to fund their commitments. In particular, in the Burg El
Arab field in Egypt, the Group’s JV partner currently owes the Group in excess of $10.0 million relating to its past
funding commitments, resulting in additional costs for the Group which may not be recoverable under the terms of the
governing PSC.
Where the Group is not the operator of an asset (such as in the ERQ field in Egypt, the Mansuriya field in Iraq, certain of
the Group’s assets in Yemen and the Group’s operations in Oman), it will have consultation rights and voting rights in
relation to significant and/or operational matters, but it will not have control over day-to-day management, including
with regard to operational and technical decisions, resource allocation, and health, safety and environmental issues.
Third-party operators may refuse to share technical or operational data, or may fail to exercise the requisite technical or
operational skill in carrying out exploration, appraisal and development work, resulting in delays or less successful
results than might otherwise be the case.
Operator mismanagement of an asset or failure on the part of the Group’s JV partners to effectively coordinate the
operation of that asset may result in significant delays, losses, liabilities or increased costs to the Group, or the loss of
potential growth in production or reserves. Furthermore, to the extent the Group seeks, for business, financial, legal or
other reasons, to co-operate with any of its JV partners in order to pursue exploration and appraisal drilling opportunities,
or in order to develop or monetise an asset, any failure on the part of the Group or such JV partners to successfully co-
operate with one another may hinder the Group’s ability to increase its reserves or production or lead to disagreements or
disputes between or among JV partners. Any such mismanagement or failure to co-operate could have a material adverse
effect on the Group’s business, prospects, financial condition and results of operations.
Oil and gas exploration, appraisal and development activities are inherently hazardous and are vulnerable to
potentially uninsurable operating difficulties, natural disasters and other problems which can damage the Group’s
property and reputation, and disrupt production.
Developing oil and gas resources and reserves into commercial production involves a high degree of risk. The Group’s
exploration, appraisal and development operations are subject to all the risks common to the oil and gas industry. The
Group’s operations are vulnerable to natural disasters, including fire, earthquakes, floods and tropical storms. Operating
difficulties, including unexpected geological variations and equipment failure, could create unanticipated costs and
disrupt production for indeterminate periods. Oil and gas fields and related infrastructure are also known to be targets of
military operations and terrorism in certain countries, including Yemen and Iraq. A significant accident or incident at one
of the Group’s operations, as a result of action by employees of the Group, its third-party contractors or its JV partners or
otherwise, could result in significant reputational damage, monetary damages in the form of repair and remediation costs,
litigation expenses, fines or other liabilities, and could also result in loss of the relevant licence or loss of permission to
operate in the affected jurisdiction altogether.
Adequate insurance coverage at reasonable rates for the above and certain other risks is not always obtainable. Although
the Group maintains insurance for certain losses, the Group’s insurance may not cover every potential risk associated
with its operations, in every significant jurisdiction, which in addition to natural disasters also exposes the Group to
uninsurable liability for claims including pollution, environmental damage, fires and cratering. There are also certain
types of losses (such as from wars, acts of terrorism or acts of God, business interruption, property risks and third party
(public) liability) that may not be insured or generally are not insured because they are either uninsurable or not
economically insurable. In addition, the Group’s insurance does not currently provide coverage for the consequences of
any business interruptions, such as equipment unavailability, equipment failure or labour disputes, nor does it cover
damage or disruption caused by terrorist incidents. The occurrence of a significant adverse event not fully or partially
covered by insurance could have a material adverse effect on the Group’s business, prospects, financial condition and
results of operations.
