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Despite the continued low oil price environment, Kuwait Energy continues to generate positive operating cash
flows with cash and cash equivalent balance of US$54.5 million and no debt maturities in next 12 months. During
1H 2016, the Company has made significant progress in reducing underlying costs of production and general and
administrative expenses.
Financial performance:
Cost rationalisation, low cost producer
Group revenue mainly comprises of oil sales. On average, the realised oil price in 1H 2016 were US$34.8/bbl (1H
2015: US$57.6/bbl), a decrease of 40% compared to same period in 2015.
Kuwait Energy is a low operating cost per barrel producer due to its on-shore MENA focus. The Group’s
underlying field operating cost amounted to US$6.0 per barrel (1H 2015: US$7.0 per barrel). Depletion and
amortisation of oil and gas assets amounted to US$17.2 per barrel (1H 2015: US$26.6 per barrel), the decrease
being attributable to the reduced asset value post impairment provision at the year-end 2015 and change in
production mix from high depletion rate field to low depletion rate field.
As a result of the sustained low oil price which has created challenges for the entire oil industry, Kuwait Energy
has focused on reducing its cost base. Net general and administrative costs were significantly lower at US$6.9
million compared US$9.2 million in 1H 2015 as the Company went through a cost rationalisation process.
Finance costs including fair value loss on for convertible loans, net of capitalization, amounted to US$12.0 million
(1H 2015: US$13.5 million).
The above resulted in a net loss after tax of US$11.2 million (1H 2015: US$9.9 million).
Cash Flows:
Positive operating cash flow in low oil prices
Kuwait Energy generated an operating cash flow before working capital movements of US$35.1 million (1H 2015:
US$51.5 million) with US$54.5 million in cash and cash equivalents at 30 June 2016. The Group continued to
focus on collecting money owed by its major customer in Egypt, EGPC, as evidenced by the significant amounts
collected during the last three years.
Capital Expenditure:
Focus on delivering developments
During 1H 2016, the Company incurred US$78.6 million (1H 2015: US$117.7 million) in development and
production capital costs mainly on Siba field EPC contract, Block 9 drilling and demining in Iraq and producing
wells and facilities in Abu Sennan and ERQ in Egypt. Cash spent on development and production capital
expenditure of US$45.8 million (1H 2015: US$80.2 million).
Exploration expenditure of US$2.1 million (1H 2015: US$9.2 million) was incurred mainly for Al-Jahra SE-1X well
in Abu Sennan, Egypt.
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