63
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of the Group should be read in conjunction
with the Group’s consolidated financial statements and the related notes included elsewhere in this Offering
Memorandum, as well as the “Selected historical consolidated financial information” above and with the information
relating to the business of the Group included elsewhere in this Offering Memorandum. Prospective investors should
read the whole of this Offering Memorandum and not rely on the summarised data. The Group’s consolidated financial
information has been prepared in accordance with IFRS as adopted by the European Union.
The discussion includes forward-looking statements that reflect the current view of the Directors and involve risks and
uncertainties. The actual results of the Group could differ materially from those contained in any forward-looking
statements as a result of factors discussed below and elsewhere in this Offering Memorandum, particularly in “Selected
historical consolidated financial information” above.
The Group has published on its website financial statements for the years ended 31 December 2011, 2012 and 2013
which differ from, and are therefore not comparable to, the corresponding financial information presented in this
Offering Memorandum. These differences are due to:
• Discontinued Operations in Russia and Ukraine. The financial information presented in this Offering Memorandum
for the years ended 31 December 2011, 2012 and 2013 includes the results of operations of the Group for a period
in which the Group received revenues and production, and/or incurred expenses and incurred capital expenditures
in, its Russian and Ukrainian operations. In April 2014 the Group completed the sale of its assets in Ukraine and
the Group is currently engaged in negotiations in respect of the sale of its assets in Russia and expects to complete
the sale during the third quarter of 2014. As a result, the Group has classified its operations in Ukraine and Russia
as discontinued operations in its financial statements included in this Offering Memorandum for the years ended 31
December 2011, 2012 and 2013 and for the three months ended 31 March 2013 and 2014. The financial statements
published on the Group’s website for the years ended 31 December 2011 and 2012 do not classify the results of the
Group’s operations in Ukraine and Russia as discontinued operations.
• Adoption of IFRS 11. As a result of adopting IFRS 11 as at 1 January 2014, the Group changed its accounting
policy for its interests in joint ventures. Entities over which the Group exercises joint control are now accounted for
using the equity method, whereas they were previously proportionately consolidated. The Group has applied IFRS
11 retrospectively, in accordance with the transitional provisions and therefore the Group’s consolidated financial
statements included in this Offering Memorandum for the years ended 31 December 2011, 2012 and 2013 have been
restated accordingly.
Except as otherwise indicated, all information in this section regarding the Group’s estimated oil, gas and condensate
reserves and resources has been extracted from the “Competent Person’s Report
.
”
Overview
The Group is an independent oil and gas company actively engaged in the exploration, appraisal, development and
production of hydrocarbons across the MENA region and certain other jurisdictions. The Group’s asset portfolio
currently consists of 51 exploration and development licences in six countries, with the core MENA region of Egypt,
Iraq, Yemen and Oman accounting for 47 of these licences. The Group had a total average daily working interest
production of 22,468 boepd for 2013 and currently produces oil from 30 of its licences, located in Egypt, Oman and
Yemen. See “
Risk factors—Risks relating to the jurisdictions in which the Group operates—The Group operates in
jurisdictions that are subject to significant political, economic, legal, regulatory and social uncertainties
”. In order to
focus management attention and Group financial resources on its exploration, appraisal and development assets in the
core MENA region, in 2013 the Group resolved to dispose of its operations in Russia and Ukraine, classifying them as
discontinued operations in the Group’s financial statements. In April 2014 the Group completed the sale of its assets in
Ukraine. The Group is engaged in active negotiations in respect of the sale of its assets in Russia and expects to complete
the sale during the third quarter of 2014. The Group has also ceased to pursue new projects in Pakistan and Latvia, and
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. Certain of the Group’s assets are operated as unincorporated joint ventures with other oil and gas companies,
and the Group’s working interests in the exploration and development licences granted over its assets range from 15% to
100%. A Group company is the operator of 19 of the 51 licences in which it holds an interest and a Group company is
operator of at least one asset in each of its jurisdictions other than Oman and Pakistan.
The Group has recorded an operating profit for every fiscal year since it was founded in 2005, and generated $262.5
