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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2017
47
31.
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.
Though changes in oil and gas prices do not relate directly to financial assets and financial liabilities, the following
table illustrates the sensitivity of the revenue for the year 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.
Year ended
2017
Year ended
2016
US$ 000’s
US$ 000’s
Impact on consolidated income statement and retained deficit
20,339
13,890
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 normal operating 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
2017
2016
2017
2016
US$ 000’s
US$ 000’s
US$ 000’s
US$ 000’s
Egyptian Pound
23,022
4,261
3,206
1,893
Kuwaiti Dinar
738
495
3
91
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 year 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.
2017
2016
Impact on consolidated income statement and retained deficit
US$ 000’s
US$ 000’s
Egyptian Pound
1,982
237
Kuwaiti Dinar
74
40