Annual Report English

KUWAIT ENERGY plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2014

INCORPORATION AND ACTIVITIES

Kuwait Energy plc (“the Company”) is a company incorporated on 12 September 2011 in accordance with the

Commercial Companies Law in the Bailiwick of Jersey.

The Company and its subsidiaries (together referred to as “the Group”) have been established with the objective of

exploration, production and commercialisation of crude oil and natural gas.

The Company’s registered address is Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES.

GENERAL INFORMATION AND RESTRUCTURING

The Company is incorporated in Jersey, and is the ultimate parent company of the Kuwait Energy Group and owner

of all the assets and liabilities previously held by Kuwait Energy Company K.S.C.C. (KEC), a Kuwaiti company,

following a restructuring of the ownership interests in KEC in December 2011 (the “Restructuring”). During 2011,

all of KEC’s material assets and subsidiaries were transferred to the Company (which was a wholly-owned subsidiary

of KEC at that time) in consideration for the issue to KEC of 317,500,000 new ordinary shares of £1 in the

Company. The share capital of KEC was subsequently reduced to 2.5% of the existing share capital and 90% of the

shares in the Company (being 285,750,000 ordinary shares) were transferred to KEC’s shareholders on a pro-rata

basis, with the remaining 10% being held by KEC.

After the Restructuring, each KEC shareholder held 25 KEC shares and 225 shares in the Company for every 1,000

KEC shares held immediately prior to the Restructuring. Consolidated financial information for period the prior to the

Restructuring date represents in-substance, continuation of the existing Group, headed by the Company. For

accounting purposes it represents a reorganisation of entities under common control. As such, this business

combination was outside the scope of IFRS 3 “Business Combinations” and for the period prior to the Restructuring

the results have therefore been prepared using the principles of merger accounting. Under this method:

• the consolidated assets and liabilities of the previous ultimate parent, KEC, were recognised and measured at the

pre-restructuring carrying amounts, without restatement to fair value;

• the results for the period prior to the date of the Restructuring are those of KEC; and

• the difference between the historical carrying amounts of net assets transferred and consideration received has been

recognised as a merger reserve.

In July 2014, a further restructuring of the Group has been undertaken to bring KEC into the Group (see note 35).

ADOPTION OF NEW AND REVISED STANDARDS

Standards affecting the financial statements

In the current period, the Group has adopted the following new and revised standards and Interpretations. The impact

of the application of these standards is set out below:

IFRS 11 Joint Arrangements

IFRS 11 replaces IAS 31 Interest in Joint Ventures and SIC-13 Jointly-controlled Entities- Non-monetary

contributions by Ventures. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using

proportionate consolidation. Instead, JCEs that meet the definition of a joint venture under IFRS 11 must be

accounted for using the equity method.

The Group owns a 20% equity interest in Medco L.L.C. (“Medco”), a jointly controlled entity incorporated in Oman,

engaged as operator for Karim Small fields in Oman. Under IAS 31 Investment in Joint Ventures (prior to transition

to IFRS 11), the Group’s interest in Medco was classified as a joint controlled entity and the Group’s share of the

assets, liabilities, revenue, income and expense were proportionately consolidated in the consolidated financial

statements. On adoption of IFRS 11, the Group has determined its interest to be a joint venture and it is therefore

required to be accounted for using the equity method.

IFRS 12 Disclosure of Involvement with Other Entities

IFRS 12 is a new disclosure standard and is applicable to entities that have interest in subsidiaries, joint arrangements

and associates. In general, the application of IFRS 12 has resulted in more extensive disclosures consolidated

financial statements.