Classification: General
Kuwait Energy
Kuwait Energy Plc, Queensway House, Hilgrove Street, St Helier, Jersey JEI 1ES
We would like your endorsement of the board of directors’ ongoing appointment.
Resolutions 2 and 3 - Increase in the authorised share capital and disapplication of pre-emption rights in
respect of the issue of shares to the shareholders of Concorde Oil and Gas Limited in settlement of
outstanding convertible earn-out notes
Kuwait Energy Company K.S.C.C. (KEC Kuwait), now a subsidiary of Kuwait Energy, has an outstanding
obligation in relation to our 2010 acquisition of the Luzskoye and Chikshinskoe assets in Russia from
Concorde Oil and Gas Limited (Concorde). This obligation required the issuing of further shares to the
shareholders of Concorde in the event of the proven and probable reserves of Luzskoye exceeding 25
million barrels of oil. You may recall that, in early 2012, the field was certified as having proven and
probable of 52 million barrels of oil, and as a result Kuwait Energy became obliged to issue these deferred
consideration shares to the shareholders of Concorde. Post our 2011 group restructuring, the obligation
became split between Kuwait Energy and KEC Kuwait. Kuwait Energy issued its part of the deferred
consideration shares in late 2012, however, due to Kuwait law issues, KEC Kuwait was unable to meet this
obligation, which is now proposed to be settled by Kuwait Energy. We would therefore like your approval
for an increase in the authorised share capital of Kuwait Energy by GBP514,027 and also the related
disapplication of shareholder pre-emption rights, for the purposes of Kuwait Energy’s settlement of this
outstanding obligation.
Resolution 4 - Ratification of issue of shares indirectly to shareholders of KEC Kuwait in connection with
the ownership restructuring of KEC Kuwait
I am pleased to inform you that we have completed our ownership restructuring and that KEC Kuwait is
now a subsidiary of Kuwait Energy. In this regard, due to Kuwait law issues, we had to slightly modify the
restructuring plan after the shareholder approval obtained at the 2013 Annual General Meeting such that
the consideration shares in Kuwait Energy were first issued to Kuwait Financial Centre (Markaz) before
onward transfer to the shareholders of KEC Kuwait. We therefore require your ratification of this issue of
up to 31,750,000 shares in Kuwait Energy to Markaz (which were then transferred to the shareholders of
KEC Kuwait in exchange for their shares in KEC Kuwait on a 1:1 basis).
Resolutions 5 and 6 - Repurchase of shares from KEC Kuwait and Mohammad Al Howqal
(a)
You may recall that, as a consequence of our 2011 group restructuring, KEC Kuwait owns 31,750,000
ordinary shares (approximately 9.7%) of Kuwait Energy. This holding, and particularly now that KEC
Kuwait is a subsidiary of Kuwait Energy, is complicated, confusing and a little unusual. We are therefore
proposing that Kuwait Energy repurchase these shares from KEC Kuwait at a price of KWD0.620 per
share (being the same price as for the 2011 group restructuring) to remove this cross-holding. These
shares would then be held as treasury shares – see below.
(b)
As part of an historic USD11,000,000 equity financing arrangement (which was originally implemented
by KEC Kuwait in connection with an employee share option scheme (which became obsolete due to
the 2011 group restructuring)), Mr Mohammad Al Howqal, the Chief Operations Officer of Kuwait
Energy, entered into an agreement with a third party to purchase 4,342,501 shares of Kuwait Energy
and 482,500 shares of KEC Kuwait held by that third party. Although the financing arrangement has
been substantially rolled over for another year, the financing was reduced by approximately USD1.5
million and Mr Al Howqal was therefore recently required to purchase 792,741 shares of Kuwait Energy
from the third party at a price of KWD0.670 per share. Kuwait Energy has temporarily lent Mr Al
Howqal the purchase price pending shareholder approval of the buy-back the subject of resolution 6.
