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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
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3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of consolidation
These consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiaries) as detailed in note 30. Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over
the investee. Specifically, the Group controls an investee if and only if the Group has:
Power over the investee
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements
The Group’s voting rights and potential voting rights
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of income
from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to owners of the Group and to
the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line
with those used by other members of the Group. All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
Going concern
These consolidated financial statements have been prepared on the basis that the Group will continue as a going concern
and, as such, has sufficient assets and working capital to satisfy its financial obligations as they come due. In making
this determination, management has made estimates of future revenues, and costs (both quantum and timing of
payments), and made assumptions on reserve status, the likelihood and timing for accessing reserves and continued
availability of financing. This process involves making various assumptions and judgement about each of the factors
affecting the determination of cash flows, production rates and fair values. Changes in any of these assumptions or
judgments could result in a significant difference from those used by management.
During the year, the Group was funded principally by a combination of its cash balances (see note 19), equity (see note
20), borrowings (see note 22), convertible loans (see note 23) and cash generated from operating activities. As at 31
December 2015, the Group had a cash balance of USD 105,297 thousand.
The Group has significant levels of planned capital expenditure during the next 12 months including field development
expenditures in Iraq. The Group has received a letter of conditional approval from Egyptian General Petroleum
Corporation (“EGPC”) confirming their executive approval of EGPC’s acquisition of a 20% paying (15% revenue)
interest in one of the Group’s key oil & gas fields conditional on obtaining the approval of the EGPC board of directors
and concerned authorities and finalizing the related farm-out agreement. Under the terms of the proposed farm-out
agreement, EGPC will settle the consideration owed for the farm-
out by paying the Group’s share of costs of a major
related contract with any balance being payable from cost recovery allocation received when the production commences
from this field. This agreement, which is also subject to a pre-emption process once finalised, will materially reduce the
Group’s contractual payment commitments during 2016 and 2017.
Therefore, after making enquiries and on the assumption that the farm-out outlined above proceeds to completion, the
Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence
for the foreseeable future, being at least the next 12 months from the date of approval of the 2015 financial statements.
Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing these consolidated
financial statements.
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