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KUWAIT ENERGY plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2014
60
33.
FINANCIAL INSTRUMENTS (CONTINUED)
Fair value measurement (continued)
Asset classified as
held for sale (net)
Convertible
loans
USD 000’s
USD 000’s
Opening asset/(liability) balance as at 1 January 2013
-
(87,244)
Losses arising in the period
(278,787)
(15,683)
Amounts drawndown
-
(17,000)
Additions/Payment
293,787
7,376
Closing balance as at 31 December 2013
15,000
(112,551)*
Total losses for the period included in profit or loss for assets held at
the end of the reporting period
278,787
12,071
*Net of amounts capitalised within finance costs of USD 3,612 thousand (see note 25).
Fair values of all financial instruments are not materially different from their carrying values.
(a)
For financial assets and financial liabilities that are liquid or having a short-term maturity (less than three
months) it is assumed that the carrying amounts approximate to their fair value.
(b)
Fair value of loans from banks approximates carrying value which is recognised at amortised cost.
(c)
Financial assets and liabilities that are measured subsequent to initial recognition at fair value are derivatives
(note 28) and convertible loans (note 25).
Financial risk management objectives
The Group’s management monitors and manages the financial risks relating to the operations of the Group through
internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk
(including commodity price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk. The group
seeks to manage this risk by using derivatives to hedge interest rate risk.
Market risk
Market risk is the risk that changes in market prices, such as commodity prices, interest rates and foreign exchange
rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the
return.
The Group is exposed to international commodity-based markets. As a result, it can be affected by changes in crude
oil, natural gas and petroleum product prices and interest rates and foreign exchange rates.
Price risk management
Volatility in oil and gas prices is a pervasive element of the Group’s business environment.
The Group is a seller of crude oil, which is typically sold under short-term arrangements priced in USD at current
market prices. In previous years the Group used oil put options to manage the risks of volatility in crude oil prices. At
the end of the current period the Group has not hedged its exposure to oil price risk.
The Group does not sell gas under any long-term agreements.
Price risk management (continued)
The following table illustrates the sensitivity of the profit 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.
30.06.14
30.06.13
31.12.13
31.12.12
31.12.11
Audited
Unaudited
(Restated)
Audited
(Restated)
Audited
(Restated)
Audited
(Restated)
USD 000’s USD 000’s USD 000’s USD 000’s USD 000’s
Impact on consolidated
statement of income
13,100
11,710
26,249
18,298
13,852