Update post Bond Issue in August
External Factors
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Oil Price: In August 2014, Brent Crude oil price was above US$100/bbl, in early December it had fallen to
~US$70/bbl post the OPEC meeting, its lowest level in 5 years.
Impact on Kuwait Energy
•
The recent drop in oil price will result in Kuwait Energy taking a more conservative approach in its 2015 Budget by
reducing discretionary capital and focusing on the development of its reserves. A US$1/bbl drop in oil price
reduces free cash flow in 2015 by ~US$2 million.
•
In the near to medium term, the Kuwait Energy portfolio will become less sensitive to oil price movements as Abu
Sennan gas production commences and remuneration fees are received for Siba and Iraq Block 9 production.
•
Drilling operations in Siba and Iraq Block 9 have remained relatively unaffected by the security situation in
Northern Iraq as they are located in Southern Iraq over 500km away.
•
The recent Siba EPC tendering, the last major contract to be awarded for Siba resulted in overinflated bids,
however Kuwait Energy is about to contract with an acceptable increase cost of ~US$25 million but with a
potential 3 month plus delay in Siba production start up.
•
Considering fast tracking the appraisal and early production from Iraq Block 9.
•
Mansuriya project is under administrative hold. If the security situation does not improve by mid 2015, then the
Contractors will have their historical costs reimbursed (~US$30 million KE share).
•
Kuwait Energy is fully funded at US$75/bbl oil price through to end of 2016.
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