64
million in revenues and $20.2 million in profit for the period from continuing operations for the year ended 31 December
2013, and $67.3 million in revenues and $20.3 million in profit for the period from continuing operations for the three
months ended 31 March 2014. In addition to the growth in revenues and profit in the periods under review, the Group
has continued to increase production levels with a daily average working interest production of 21,898 boepd in 2013
and 22,468 boepd in the three months ended 31 March 2014.
According to the GCA report, as at 31 May 2014, the Group had:
1P net entitlement reserves of 4.7 mmbbl of oil, 118.5 Bscf of gas and 2.4 mmbbl of condensate; and
2P net entitlement reserves of 11.6 mmbbl of oil, 118.3 Bscf of gas and 6.0 mmbbl of condensate.
On a working interest basis, the Group’s reserves (derived from the GCA report) as at 31 May 2014 were:
1P working interest reserves of 12.8 mmbbl of oil, 412.7 Bscf of gas and 8.5 mmbbl of condensate; and
2P working interest reserves of 32.5 mmbbl of oil, 629.9 Bscf of gas and 28.2 mmbbl of condensate.
GCA also reports that, as at 31 May 2014, the Group had working interest 2C contingent resources, which consist of
resources that have not matured to the point where they can be considered commercially recoverable and thus
categorised as reserves, of 729.9 mmbbl of oil, 699.2 Bscf (116.5 mmboe) of gas and 3.9 mmbbl of condensate. In
addition, GCA reports that the Group has numerous prospective resources, which consist of potentially recoverable oil,
gas and condensate from accumulations yet to be discovered. Estimates of the Group’s prospective resources are set forth
in the “
Competent Person’s Report
” annexed to this Offering Memorandum.
The acquisition and development of the Group’s assets has been financed primarily through the issue of equity, long-
term loans and operating cash flow.
Material factors affecting results of operations
The results of the Group’s operations have been, and will continue to be, affected by a range of factors, many of which
are beyond the Group’s ability to predict or control. This section discusses the key factors that management believes
have had a material effect on the Group’s results of operations and financial condition during the periods under review,
as well as those that are reasonably likely to have a material effect on its results of operations and financial condition in
the future.
Oil prices
The Group’s revenues are derived from sales of oil, natural gas and related hydrocarbon products (including condensate).
The Group’s sales of oil have accounted for a substantial majority of its revenues during the periods under review, and
an increase in the average realised sales price of the Group’s oil production has been one of the primary drivers of the
increase in the Group’s revenue during this period.
As the Group continues to increase its production of oil volumes, the market price of oil will have a direct impact on the
Group’s results of operations in the jurisdictions in which the Group operates under production sharing contracts and
royalty/tax regimes. Under these fiscal regimes, higher market prices generate higher revenues under the terms of the
fiscal agreements with government bodies. In certain other jurisdictions, particularly Iraq, the Group’s production is
governed by service agreements for which production volumes, rather than market prices, are key drivers of revenue.
Even under the Group’s service agreements in Iraq, which govern assets that are expected to principally produce natural
gas, cost recovery by the Group will be determined with reference to the market price of crude oil.
The revenues that the Group receives for its production of oil and natural gas are therefore influenced by (a) fluctuations
in the regional and international market prices for crude oil, as determined by the global or regional balance of supply
and demand as well as the relative strength of the US dollar (which is the currency of account for crude oil trading on the
global commodities markets) and (b) any quality, local/regional or other discounts to this price which determine the
realised price for the Group’s oil production. For example, the Group’s sales to EGPC in Egypt, which accounts for the
majority of the Group’s revenue, are typically sold at a slight discount to international Brent crude prices. Prices for
condensate are also partly determined by regional and international market prices for crude oil.
The table below sets out the benchmark international Brent Crude oil price and the Group’s average realised oil prices
per barrel in the periods indicated.
