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Operations
Production
Kuwait Energy experienced modest production growth in 2011 with an average daily working interest production
of 13,624 boepd, a 2.8% increase on 2010. However, the average working interest production during the fourth
quarter was 15,018 boepd an increase of 12.3% over Q4 2010. This increase can be attributed to exploration
success and development wells in Egypt being put on production.
Specifically, in ERQ Egypt the Shahd-SE5 and Shahd-2 wells were put on production during the latter part of 2011
at 5,500 bopd and 4,400 bopd gross respectively; in Area A, Egypt the Ahmed-1X and Shukheir NW-X9 wells were
put on production at 890 boepd and 580 boepd gross respectively. In BEA, Egypt wells BEA-9, BEA-10 and BEA-11
put on production at 686 boepd, 96 boepd and 1,008 boepd gross respectively.
Development Activities
• Significant progress in Iraq and a substantial increase in Russian reserves
• 49 development wells drilled in 2011
• Initial WI production of 5,575 boepd added, mainly from Egypt
In Iraq, the Company’s interim work programme has been approved by the South Oil Company, and a preliminary
development plan for the Siba gas field has been submitted.
The approved programme front loaded levels of activity where possible, which ensured that all planned activities
for 2012 can be completed irrespective of when approval for the fuller preliminary development plan is formally
received. This means Kuwait Energy can make tangible progress in 2012 and has allowed the Company to
commence the tendering process for the sub-contracting of technical services.
In Russia, the acquisition of a further 28 km
2
of seismic data, in addition to the 20 km
2
already held, on the Luzskoye
asset has revealed more evidence of oil in place. At the same time, the Company has updated and optimized its
field development strategy, which will lead to enhanced oil recovery rates. This new seismic data and updated
drilling strategy has led to a significant upgrade in proven and probable reserves in Russia.
In terms of the Company’s own capital expenditure, activity was focused on Egypt, where 12 development
wells were drilled. Particular success was achieved on the BEA and ERQ Blocks with increases in daily average WI
production.
Detailed geological and engineering studies also commenced in a number of Kuwait Energy operated assets in
Egypt (Area A) and Ukraine (Blocks NY). These studies, incorporating 3D seismic modeling, enabled improved
understanding of the optimal development strategy for these assets.
Work continued on the new treatment facility at the Luzskoye oil field in Russia and Kuwait Energy operated gas
treatment plant in Ukraine was upgraded.
Chief Executive
Officer’s Report
I am delighted to report on 2011, a year of increased profits, increased reserves, increased production and
other significant operational milestones for Kuwait Energy.
Yet again the Company has reported profits for the year, as it has done every year since inception. We have
also been very active operationally, making several successful hydrocarbons discoveries with a success rate
of 62%, formalized our entry into Iraq, increased production to record levels with exit production of 17,733
boepd and obtained the internationally recognized quality management system ISO 9001.
Financial Performance
Cash
The Company generated an operating cash flow before working capital movements of US$111.9 million in
2011, up 30.7% compared to US$85.6 million in 2010. Cash and bank balances as at 31
st
December 2011,
were US$40.5 million.
The Company completed the rights issue during the year through which it raised US$ 107 million to fund
future expansion.
Capital
US$144.7 million was spent during the year on drilling:
• 49 development wells; and
• 8 exploration wells
Profit
Net profit of US$ 34.8 million was generated during the year, a 58.9% increase compared to US$ 21.9
million in 2010. This was driven by 37% increase in the average realized oil price, partially offset by a non-
cash impairment charge of US$ 8.5 million and hedging losses of US$ 7.1 million.
