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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2016
43
28.
FINANCIAL INSTRUMENTS (CONTINUED)
Market risk (continued)
Commodity price risk management
Volatility in oil and gas prices is a pervasive element of the Group’s business environment. As a producer, the Group
always has a ‘long’ position on the product. No hedges are currently in place. Additionally, in Iraq the concession
contracts are service fee-based, thus mitigating the impact of oil price movement.
The Group is a seller of crude oil and natural gas, which is typically sold under short-term arrangements priced in US$
at current market prices.
The following table illustrates the sensitivity of the revenue for the period to a reasonably possible change in oil and
gas prices by +10%. A positive number below indicates an increase in profit and decrease in price will have the opposite
effect.
Six months ended 30 June
Year ended
31 December
2016
2015
2015
Audited
Unaudited
Audited
US$ 000’s
US$ 000’s
US$ 000’s
Impact on consolidated statement of income
6,482
8,910
15,564
For sensitivity of the impairment of oil and gas assets due to possible change in oil and gas prices please see note 13.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date are as follows:
Assets
Liabilities
30 June 2016
31 December
2015
30 June 2016
31 December
2015
Audited
Audited
Audited
Audited
US$ 000’s
US$ 000’s
US$ 000’s
US$ 000’s
Egyptian Pound
6,059
3,312
-
3,294
Kuwaiti Dinar
579
693
24
65
Foreign currency sensitivity analysis
The Group’s main foreign currency exposure is to fluctuations in the Kuwait Dinar and Egyptian Pound.
The following table details the Group’s sensitivity to a 10% increase and decrease in the US$ against Kuwaiti Dinar
and Egyptian Pound. The sensitivity analysis includes only outstanding Kuwaiti Dinar and Egyptian Pound
denominated monetary assets and liabilities and adjusts their translation at the period end for a 10% change in foreign
currency rates. A positive number below indicates an increase in profit and a negative number indicates decrease in
profit. All other variables are held constant. There have been no changes in the methods and the assumptions used
in the preparation of the sensitivity analysis.
30 June 31 December
2016
2015
Audited
Audited
Impact on consolidated statement of income
US$ 000’s
US$ 000’s
Egyptian Pound
606
2
Kuwaiti Dinar
56
63