20TH ANNUAL REPORT? 2001 TAKING OFF TO GREATER HEIGHTS Ul ey Cons tea eel sae ea UN a Coons)TAKING-OFF-TO GREATER HEIGHTS reer aoe eee CT arg Eerie) PUR rn eee re Seer Cec te ersonrct eee ithin the i reas Despite unfavorable conditions, the team drove KUFPEC forward, Soran et Ratt ecco ti Erect ‘Today KUFPEG has shown solid ead Cee eee armed with a deep understanding of Rennes Reet Lens ice eM TRC nin CoC Rent Rite ine Eye ere stem ORT oe Be workings of the political and cultural SECC aco reay sett rau a eee CeT a tag Coos cere occ for their particular skills and Pere ek ee eo Rc Srey OTe Pere een ec aoa co ey Coe RT Inne success. KUFPE eee eee oa ars Allis set for the KUFPEC adventure one oes ete Greene MerCe core Ol ce this will be a mere stopover. As we Pus cea en be a triumph highlighting points in Peron cocenri Tecra ee eee ord Preeueces Coern ea Con ey eT ft areaHM. Sheikh Jaber AL-Ahmed ALJabor Al-Sabah The Amir of the State of KawaBoard of Directors 2001 Exeeutive Directors 1. Mr. Bader N. Al-Khasht 2. Mr, Abdullah M. Baroun Non-executive Directors 3. Mr, Tareq J. Al-Wazzan 4. Mr. Abdulla A. Al-Shalfan 5. Mr. Nizar M. Al-Adsani 6. Mr. Sanad H. Al-Sanad 7. Mr, Bader A. Al-KandariKUFPEC’s Mission To increase the value of the Company to the State of Kuwait by profitably exploring for and producing hydrocarbons internationally. KUFPEC’s Vision To become one of the major contributors to the income of the State of Kuwait. A realixable target for the company within the foreseeable future, is to achieve net production of 100, 000 boepd by year 2010 while maintaining an average long-term rate of return greater than that offered by KPC’s other investment opportunities KUFPEC’s Objectives 1. To achieve a production target of 100,000 boepd by year 2010 supported by a reserves base of 410 mmboe. 2. To achieve a 10% average profit growth and a long-term average of 10% return on average capital employed over 10 years. 3. To create an organization that is effective and efficient. 4, To access technology and transfer knowledge to relevant KPC subsidiaries in Kuwait.Management Kuwait Forei = Mr, Abdullah M. Baroun Mr. Daniel L. Kirisits Dr. Abdulsamee AI-Bahba Mr. Mo mmed Al-Howqal Dr. Gerald H Mr. Abdulnaser Y. A-Fulaij Mon rare Plena Mrs, Sarah Akbar Mr. Adnan 8, Ashkanani Mr. Waleed Al-Awadhi Mr. Britton 0. Mockridge Mr. Abdullah M. ALNibariMessage from the Chairman It is indeed a pleasure to present this report on KUFPEC's 2001 performance and potential, for the first time as Chairman and Managing Direct 101 has been a year rich with evemts, achievements and important implications or the life and future of KURPEC Despite rapidly changing Jitions facing the world's upstream oil industry, KUEPEC continued as ond its people and a mitments to both its sole sharchelder and parent company, Kuwait Petroleum Corpor When I reflect on the monumental year that KUFPEC has just completed, I realize that the year vast three fronts: we cele ted our 20ch unaiversary, 2001 will be remembered as significant on at tre generated remarkable results in respect of financial performance and oil and gas production, and wre entered ant ¢ of extensive exploration Reaching 20 years isa significant milestone by today’s corporate standards. In a world of increasi unpredictable and often disappointing investment returns, providing shareh is a prodigious accomplishment, We have come a long end difficult way since 1981, when KUFPEC wae incorpornied, yet it is only the be fa road towards greater success and new horizons. Now we are in the curly years of pursuing our new strategy to achieve produ: ‘de year 2010, of 100,000 boepad Our 2001 daily production of oil and gas grew by 9% to avernge $2,179 barrels of il equivalent, and the 2001 financial statements cl Je reporting @ net profit of US$ 86 million, after tax, US$ 13 mil n hig + than budget. The significance of such result is 9 1 compared with historical maximum registered in 2000, a year in which the price of oil was more favorableFurther to this list of successes during the year 2001, KUFPEC also has entered an era of ng to USS 944 milli extensive capital expenditure amou: of 36% over 2001 mm in 2002, representing an increase We crossed another milestone with the launch of Premier - KUFPEC Pakistan (PKP) in 2001 as a result ofthe joint venture, formed between KUEPEC and Promier Oil Ple By virtue ofthis joint venture, KUFPEC has acquired 50% interest in all the co Paki cessions in which Premier has interest in jan, including producing fields, fields under development ax well ‘exploration acreage, Behind all the Figures, gas compress 1, pump jacks, drilling rigs and pipelines is KUFPEC’s mos important asset - its people. Our success is the natural outcome of the competence and commitment of those who develop our ideas and execute our strategy, and therefore, i is my privilege to place on. record, on behalf of KUEPEC's management, deep appreciation for each and every one of our employees over the world. As we continue to grow and build our 20-year-old company, we are guided by our core values and principles, Social responsibility has always occupied « high position on KUFPEG's agenda of priorities, ‘and great efforts have been exerted to maintain a mutually beneficial relationship with the communities in which we operate, Over the years, KUFPEC has made substantial contributions to road building, ‘schools, religious institutions, medical facilities and other similar establishments in fulfilling its mission to contribu o the wellare of these commuitios and their inhabitants. In the context, KUFPEC’s contribution towards community locally and abroad included our participation in several projects and init ducted ives that reflect the company's core values such as the Drug Campaign c by che Kuwait National Project For Prow sion OF Aduiction, the environmental initiative of the Kuwaiti Diving Team, the building of a school at Bula on Seram Isl participati the building of a Mosque in Tunisia. In conclusion, I would like to take this opportunity to record sincere appreciation and thanks for cour shareholder Kuwai Petroleum Corporation, and our previous Chairman and Board members for their invaluable guidance and support. Lalto would like to welcome our new Board members and thank them for their efforts to achieve our goal of building KUFPE: into a pre 1 upstream company. We pray to Almighty Allah to inspire us with the proper guidance to serve our beloved country under the wise leadership of His Highness The Amir of the State of Kuwait, Sheikh Juber Al-Ahmed AlJaber ALSabah (God protect him), and His Highnoss The Crown Prince and Prime Minister, Sheikh Sa’ad ALAbdullah ALSalem ALSabah (God protect him) Bader N. AL-Khashti (Chairman and Managing DirectorDirector’s Report on Activities “This ic onty the beginning ofa road towards greater success, to new horizons and KUFPECs potential ie ited only by ite dams. The new strategy to achieve production of 100,000 bocpd has the full sanction and aupport of KPC and promivea to establish KUFPEC asa material contributor to the income of KPC and the State of Kuseait. WE De Adel AUSaboch Minis of Charan of KPC Congrtaatry speech Ac ivity Highlights 2001 * Daily production of oil and gas grew by 9% to average 82,179 boepd. profit, after tax, amounted to US$ 86 million, 13 million higher than the budget 5€ celebrated its 20th anniversary un: n the presence of H-E Dr. Adel Al Subeeh, * The formal approval and launch of KUFPEG’s n 1 of 100,000 bor strategy to achieve product by 2010. * Purchase 50% of Premier (PKP) interest in Pakistan. ‘These include under development and producing fields in addition to exploration acreage. © Launching KUFPEC website with aim of ere: EG to more information about the company and its international image for KUFPI nd provid activities © ‘The creation of KUFPEC Intranet site to integeat n the company’s departments and improve to information, communication, employee ac colleagues and a host of other HR benefits, quickly and cost-effectively. KUFPEC's Profits - 254 58 257 284 iillé ill ULI ii ili 10 lin F804 yerzon PENCE ee) 100 90 80 70 60 50 49 30 20 10 2 Hisuaget Mm sus Profits for the year is US$ 86.7 MM Vs budget of USS 74.0 MM. Actual Profit is 17% higher than budget,KUFPEC offshore Australia - HarrietDirector’s Report on Activit Explora “To achieve any mission, ane 1 been implementing many of thenestratogien plan ie that there are now formal Development . Pi ts practioat balances and workable strategies. In fat, we have already wra number of years, but one prime edvantage of our new ed and elear. [te a sure strategy to success.” Alculloh M. Baroun hie Operon fier The past year provided us a unique opportunity, not only to view our asset base and its performance, but also to test our resolve to keep abreast with the accelerating fundamental changes in the upstream industry, armed with a new strategy for expansion up to 2010, and renewed enthusiasm for the future of our company in order to ensure that we can continue to deliver substantial value to our shareholder, not just for one or two years but for many years to come. Despite a remarkable performance and great accomplishments of the year 2000 and the le by high erude prices in the year 1999, KUFPEC, record financial results made poss concomitantly with the celebration of its 20th anniversary in the year 2001, made a dramatic step forward with the launch of its visionary expansion strategy, setting the ambitious target of 100,000 boepd production by the year 2010. Within the context of such growth strategy, KUFPE initiated during the past year an edented and extensive exploratory program targeting opportunities and locations which combine both excellent prospectivity and acceptable business risk profile, with a record US$ 344 million capital and exploratory expenditure in 2002 , representing an increase of 36% over the year 2001. day, KUFPEG conducts on going exploration programs in three major onshore and offshore regions - Middle East & Africa, Far East and South East Asia Despite the focus on exploring for new hydrocarbon resources, KUFPEC continued to develop its existing business and maximize the value of its core operations and the exploitation of current oil and gas properties through constant improvement. 2001 Budget 3 a8 15001 3 5 2 e as 8 & 10,000 + os = 3 2 som z 0 3 ‘mi Budget 2001 Es : ee ition. | 1 Actua 2001 tm Budget 2002Director’s Report on Activi Exploration . Devel: SKUPPEC repr ite international Dew mellig rol el With an experienced and supportive team fuellod by a spirit of optimiam for the future. The uniqueness uusincsses while ies. 1. Produ Sf KUFDEC ie (evolinationed stfaiha cali management, 1) ales behaves like a private company in respect of ite emaining a governmental entity in essence. Mohammed AttHowgal Mana Mile ast i Region Middle East & Africa Re; 2,500 2,000 1,800 | 4,000 500 1997 1998) 1998 | 1396) 2000" 2007 BoE Yemen KUFPEG acquired a 40% working interest in the offshore exploration Block 15, Mukalla in the Gulf of Aden. A comprehensive 2-D seismic survey has been 2001 an onducted over the acreage in plans to shoot 3D seismic are scheduled for the year 2002. The concession is operated by Oil Search Middle East LTD. During the 2001 year, the Bast Shabwa fields have produced over 10 million barrels, 3-D and Ca 2D seismic surveys were acquired during the same period in order to define well loc: for the Phase III drilling campaign which began in late 2001 and continued throughout 2002 Facilities expansion at Atuf NW has bee implemented due to the hetter than expected performance which also resulved in additional wells being drilled. Kharir water-handling capacity is being expanded in order to maximize oil production, Both of these projects will continue into 2002. Average production in 2001 was 27,528 bopd. Expected production in 2002 is 31,600 bopd. ‘The Jannah fields produced over 21 million barrels in 2001. 3:D seismic was acquired in 2001 in order to define well locations for development drilling program in 2002. Jannah-4 was drilled as a replacement well for Jannah-1, which was found to have suffered casing collapse. The new well e1 tered hydrocarbons at levels considerebly less deep, than that of the original well and should be @ good producer. It is in the process of being tested uaa eae [asco a ae see = Bl sss amas om | ‘Sidi El Kilani ‘CTKP 45.00% 2Exploration prior to hook-up to the nearby Al-Raja facilities. It is expected that production from this field 2002. will start up Average production from all fields in 2001 was 56,911 bopd. 15 54,000 bopd. Expected production in 20 Egypt KUFPEC acquired 40% working interest in the IEOG (Agip) operated North Bardawil block in the Nile Delta. exploration A comprehensive 3-D seismic survey hus been conducted over the offshore acreage, with plans to drill two exploration wells in 2002, targeting Pliocene gas sands which are TEOG's nearby producing in permits ‘The company also acquired » 30% working interest in the IEOC (Agip) operated North Red Sea exploration Block II. Plans to drill an exploration well on this offshore acreage are scheduled for the year 2002 Apache assumed operatorship of the Ras Kanayes permit in 2001 following their acquisition of the interest of Repsol and Novus. The Egyptian authorities approved a modified development plan and it is expected that on will commence in 2002, product Tunisia KUFPEC to define the potential hydrocarbon value of the North Kairouan Exploration Permit Market stall - Tunisia ‘The first of two obligatory exploration wells was drilled in 2001; Alouan-2 was deviated from an old exploration well that had tested oil in the 1980's. Alouan encountered oil at a different level and jed. However, the well failed to flow at commercial rates and was abandoned In-house work continued to define a location for the second obligatory well which is scheduled for the year 2002, ‘The Sidi El Kilani field has produced over 42 million barrels, iderably in excess of earlier predictions. A detailed review of the reservoir model was undertaken in order to define additional well locations, Three locations have heen identified for drilling in 2002 - a sidetrack of ane ing dry hole, a contingent development location and an independent closure in the south of the field. Average productio 2001 was 7,452 bopd. Expected production in 2002 is 7,010 bopd. 8Director’s Report on Activities Exploration . Development, Production “The aggressive strategic planning isthe main reason forthe auccers ofthe year 2001. Bhat makes KUFPEC s0 unigue ie being a tery advanced institute with a good inceatment, KUFPEC was consulted for many projects and jobs for other countries. KUFPEC isan international company.” Dr, Atnulsamee AtBabbahans Far East Region rmmsofyld tn carly 2008. The Fields extimated to produce 1.0 tof. Pakistan Further more, KUFPEG acquired 6% KURPEG? offern va'srenmthen Ji piceence working interest in the Badhra gas field which was discovered in 1999 and is a satellite to the Bhit field. im Pakistan made solid progress in setting the stage for tremendous growth ahead, with the formation of the Premier-KUFPE ‘The company also holds 9.375% working Pakistan (PKP) a joint venture with Premier Oil interest in the Zamzama field, which was company. By virtue of this alliance, KUFPEG discovered in May 1998 and appraised in acquired 50% interest in all the concessions March 1999. Both wells tested to be prolific in which Premier is involved in Pakistan producers and have been on extended well test ‘The acquisition increase KUFPEG’s reserves since March 2001. 4 special gas sales agreement by approximately 40%. ‘was signed for delivery of 70 mmscfpd to SGC ‘The purchase involved acquiring interests in for a period of 22 months. A comprehensive producing fields, fields under development as development plan, which includes three well as exploration acreage development wells, has been approved to KUFPEC holds 6% working interest in the produce 300 mmsefpd starting 2nd quarter of Bhit gas field by virtue of the (PKP) alliance. 2003. The gas sale contract has been agreed Full development of the field is now underway and initiated, and will be signed by the at estimated cost of $285 million (gross). First government of Pakistan by the end of January, production is anticipated by the end of 2002 2002. The Field will produce in excess of 2.0 tef. building to a plateau production rate of Gas price agreement is also being negotiated. ray erty Operator ‘All under Premir Pakistan Bhit | Lesme oi ——_—— KUFPEC Pakistan BV. Zamzama BHP Lasmo Oi Production KUFPEC share } in PRP 50% Gadirpur ‘oan Production | psa oak db Nani | Dacha, Kinhar, Dumber, Bolan | PAP Exploration China Ying Ge Hai/ Yacheng BP Arco Production 14.70%Director’s Report on Activities Exploratio KUFPE as 15.79% in the Kadanwari Gas field. In 2001 the field prodi 60 mmsef/d, which is higher than the predicted volume of 55 mmsef/d. Modifications to Kadanwari gas-processing plant were successfully completed to process the gas from adjacent Miano gas field. Well K-13 was drilled in the southern part of the field and preliminary results appear very encouraging. Seismic survey will be carried out neat year in order to better exploit the southern part of the field. The company also holds 4.75% working interest in Qadirpur gas field, which is the third largest field in Pakistan. The field has been producing since 1995 and is expected to produc in the year 2017. The field is untill expiry da currently producing at the rate of 300 mmsefd. Expansion to producing facilities are scheduled for 2002. Th will increase the production rate to 400 mmscf/d starting 2003. Further to these production and developmen interests, KUFPEG has 2 on working interest in the Bolan conces Jn. An appraisal well was spudded in December 2001 and results will not be available untill next year. In the Dadhar Block, KUFPEC has 22.81% exploration working interest. Seismic work is being considered in this concession. Dumbar is the Yacheng field offshore - China Developn i. Production most promising of the exploration con and KUFPEC has 50% working this year and will continue into next year. Two exploration wells are planned for the year 2002, China Yacheng gas field, the largest find in KUFPECs history, continues to be one of the major contributors of revenues and a hoon to the company's strategic portfolio. Six development wells were drilled as part of the Phase I continued development plan to contract quantity Feasibility study to install wet gas n was carried out this year. A 3-D seismic was also carried out during the year and pretation is underway Yacheng Production History 4,000 3,500 3,000 2,500 2,000 4 4,500 4,000 4 00 | of - 1095 1996 1997 1998 1999 2000 2001 YearDirector’ Expl Report on Activities Developmen East South Asia Region Exploration drilling ai J with the Harriet complex of oil and \s fields and nearby properties, 70km offshore Western Australia, continued at a high rate in 2001 Eight of the eleven wells drilled were exploration ted in new fields discoveries, including the South Plato and Gibson oil fields and the Errol gas field. The South Plato-1 and Gibson-1 wells were completed as future oil producers. Three appraisal wells were drilled, two of which were successful on the Simpson oil field and on the Linda gas and condensate field, The continuing explorati s reflects the benefits of good quality modern 3-D seismic data coverage across most of the Ha whi ts to be m confidently mapped prior to drilling. No new seismic data was acquired in 2001, but reprocessing of existing data acquired inDirector’s Report on Activitie Exploration . Development . Produ previous years has aided interpretation At lease chi n wells are teen explorat planned for 2002 The company is actively evaluating new exploration and production opportunities in its focus areas on the North West Shelf of Australia. Development of recent discoveries in the Harriet area offshore Western Australia, has J decline ed a previo il production. to their close proximity to the existing Harriet facilities on Varanus Island and to nearby existing offshore platforms, small new field discoveries in this area a economically attractive to develop. The Gipsy Harriet facili and North Gipsy oil fields were brought 0 stream in February and the fast tracke incorp development of the Simpson oil field was tots tutal of Yhien.eioameer completed in November after satisfying all paugar as cn aswatceidiapose ley ine development of the Gipson and South Plato tal requirements in this sensitive oil discoveries is planned for 2002. Bicllow water oreei Vollowiag toe eueostetal pereelfariliugieteccond ena platiora: Mier felts tertital thet lieerien srealli= Prairasieiedia «hel derglemenrihtee withinle#ep) Gilemeier| rxdice ef the person lfyiiece a Varanas [eeack ees Ieined gesvercoometug end Bea Gau(ds,wendling)feetiiias ETeetlste tet eee tall aed 3.000. to the mainland by twin ac eeepc tars 2,000, facility for liquids. 1.500 Due eee nr olNdeecleys 1 0 production from the 500 | Harriet area increased to peperamrete coo uiead oak | e235 8 B 8 8 8 S | compared with 5,880 bopd E beeen EME fo; the previous yonrDirector’s Report on Activities A further signifies 21,200 bopd is foi increase to approximately east for 2002 as a result of the new production from the Simpson, South Plato and Gibson fields, Harriet gas sales continued to increase; Jose to 90m averaging ¢ sefpd. Gas customers include Alinta Gas, Normandy Power, Alcoa, Boral, Great Gentral Mines, AGL, Epic Energy, and CMS. A major new gas sales agreement is currently under negotiation and will potentially commit for sale of all Harriet’s remaining gas reserves, It will also enable significant vol of associated condensate to be recovered. An upgrade of 18 compression capacity is likely to accommodate increased sales in 2002 In permit area WA-246-P, 60km northeast of Harriet, studies on information from the eatlier Harriet field offshore Developn Produc Corvus (gas) and Tusk (oil) discoveries continues. The Tusk-2 appraisal well did not establish commercial reserves. No exploration drilling is planned in this area in 2002 The company has minor production interests in oil and gas fields in Queensland's Eromanga Basin (2%) and in the Northern Territory's Palm Valley gas field (1.248%) west of Alice Springs. The company is in the process of divest interest in those small assets. Indonesia Geoscience activities continued in the Seram PSC, located onshore Seram Island some 2700km east of Jakarta. Activities included planning and start up of remote 1g and regional geology survey, a regional gravity survey over the whole of PSC, and preparation for drilling the Lola Kecil-l exploration well, Lola Keeil, scheduled for drill ag early in 2002, will test a structure located between the Oseil field and the producing Bula field, and may be similar in size to the Oseil field, Phase I of Oseil field development was the primary focus in 2001, with production starcup scheduled for second half of 2002. Engineering and procurement were essentially completed during the year, truction began on the production, processing and export facilities. These facilities will have a capacity of 18,000 bopd and will process and market up to 16,200 bopd Blending Fuel Oil and 1,800 bopd Nay ts for sa 4 produ likely into the Singapore market Drilling sites have been upgraded in preparation for the development drilli program, in which three existing wells will be ntered and completed with electricDirector's Report on Activities Exploration . Development . Production selecting the well locations for Phase II of the Oseil Development Phase I of Oseil Development is designed to produce some 12,000 bopd on average during the plateau p od, and should provide sufficient data for Phase II Development Phase II startup is expected in the Late 2003/early 2004 period, and may include an additional six wells and facilities expansion In the Natuna Sea Block A, located some 200km north of Jakarta and operated by Promier Oi, a 2500km 2-D seismic survey was of the block performed in the eastern designated as Area TV. At least one exploration well is contemplated in 2002 to evaluate one of A mast seven large structures in this area, Also in this submersible pumps. In one of the wells, block: fi ick will be drilled pmenced 1 gas sales to Singapore cd ise ene eesentalal in 2001. A gas processing platform has been to more efficiently drain reserves in that installed adjacent to the existing wellhead ra platform on the Anoa field. The Pelikan, Gajah A 3-D seismic survey over the Oseil Puteri, and Bison gas fields may be developed field was also initiated with the aim of ata later date to, sure gas supply to Singapore better identifying the structure and for for the 22 - year gas sales Seram Talend - Indonesia 19Director’s Report on Activi DEnrwae nee 3,000 2,500 2,000 4,500 4,000 500 290m a BoE 190 Negotiations are well advanced for « 100 mmsef/d gas sale to Malaysia from new fields discovered in the year 2000 drilling campaign A gas sale agreement should be signed by year end, Gas sales are expected to startup in July 2004 from a new-build production, processing and compression platform situated at Gajah Baru field, Further wells and facilities will be added as necessary to ensure contractual gas delivery requirements of some 400 BCF. 2 ies Malaysia KUFPEC achi ved significant exploration success on one of two interests that it obtained in Malaysia in late 2000. The first, Block SK306, is located offshore Central Sarawak cov ing an area of 4.513 sq.km. KUFPEC assumed a 30% working block from A interest in ada Hess (Malaysia-SK 306 Limited), who currently operates with a 45.5% working interest. Other partners in the Production Sharing Contract are Petronas Carigali and PIDG who have 20% and 4.5% respectively ‘The Sarawak Basin is a proven petroleum with large reserves of both oil and gas. The basin currently produces about 44,000 bopd, 50,000 bopd NGLs and 41 befpd gas Si 256km ce acquiring the Block a total of of 2D seismic data has been acquired and 4008km of 2-D seismic data reprocessed. A 3D seismic survey of 589 sq.km hasDirector’ Exploration . Devel also been acquired. An exploration well Rebana-t, the first of two commitment wells were drilled in January 2001 and encountered non-commercial quantities of oil and gas. Studies are going to optimally specify « location for the nd commitment well to be drilled in 2002. The second KUFPEC interest, Block PM304, is a large concession covering an area of 10,260 sq.km and is located 20 to 140km off the east coast of Peninsula Malaysia within entral western portion of the Malay Basin. in shallow waters depths ranging from 40-70 meters approximately 120km west of the Natuna Sea Block A where KUFPEC and co-venturers are producing both oil and gas. KUFPEC assumed a 25% working interest in the block from Amerada Hess (Malaysia-PM304 ed), who currently operates with interest of 40.5%, The other partners in the PSC, Petronas Carigali and PIDC have 30% and rest respectively Since acquiring the license a total of 3,564km of 2-D seismic data have been Cord reg Report on Activities _ 1. Product reprocessed and 2.801km of new 2-D seisinie data acquired, Additionally, 1349 sq.km of new 3-D seismic data has been acquired and 270 sq.km of 3-D older data reprocessed. Three wells have been drilled in 2001 ‘The exploration well Gendor-1 was drilled on the northern flank of the Jal ang structure It tested 1765 bopd from the Middle Miocene H15 Sandstones. The wildcat well Chenang-1 (Sidetrack) located approximately 50km south west of the Jambu-Liang structure, tested 480 bopd of waxy oil from the Upper Oligocene L Sandstones. The Cendor-2 appraisal well drilled on the southern flank of the Jambu-Liang structure tested at rates up to 5430 bopd from the H15 Sandstone and 3500 bopd from the H20 Sandstones, Following these significant successes, @ new 3D seismic survey has just heen acquired and, after assessment, further appraisal well locations are being planned for drilling in 2002. rtrd Daa Australia | WA246P | Apache Exploration ep 269 ‘Apache Exploration 12.79% | L: = Hariet Apache Exploration & Production | 1920% Indonesia | Natuna Premier Oi Exploration & Production 9333% | ‘Seram KUFPEC Exploration & Under development 97.50% Malaysia | PM 304 ‘Amerada Hess Exploration 25.00% | 18K 306 Amerada Hess Exploration 30.00% Sa _ =People Behind KUFPEC We are very optimintic about the future ofthe company, KUEPEC ix now growing, all directions are set and the mypport fron: oar parent company, KPC, ix available. With far International mors, will hae ool nitions in terms ofthe pportunitn worldwide.” bal market and merges of Abdulnasee XALFuleij As we continue to grow and build our 20 year-old Company, we are guided by our core values, principles, protocoles and beliefs. The strategic direction and the future vision of KUFPEG give the management of human resources a vital role. The mandate of the company is to achieve organizational excellence that will enable KUFPEC to compete and adapt to the new technological developments and best practices within the international oil industry. KUFPEC:s people mission is to champion and facilitate human resources excellence and support throughout the organization, recognizing that KUFPEC diverse people Yacheng field - China resources are valued and critical to our overall success as an international petroleum company. Human Resources policies were developed and implemented during the year, together with detailed regulations to further enhance individual commitment and accountability. Similarly, policies have been reviewed and updated for employees in each of the three regional offices to align with KUFP corporate Human Resources policies. At year end, KUFPEC’ staff totaled 173 (2000: 166) individuals, each a vital part of a skilled, integrated, international team operating in Kuwait Head Office and three offices abroad.People Behind KU We also realize the importance of harmonious workis maintaining relationship between the Company and ‘employees, and amongst employees themselves neourage open communication to ensure that everyone has a greater understanding of the Company's vision, policies and procedures Management will continue proactive velopment of increasingly effective employee relations practices, To support our growth strategy, KUFPECs multinational workforce is expected (o increase by 25% over the upcoming year in order to meet operational requirements, Our managers endeavor to be active in strategy development and execution and to deliver adm quality improvement, They strive tw be supportive of all employees and work to increase employees’ commitment to the organization and harness their ability to KUFPEC is working closely with Kuwait Petroleum Corporation and our sister companies to de op international standard Yacheng field - China PEC CTKP D, tes visit KUFPEC competency-based human re and programs, includi and develop best possible job in an increasingly knowledge driven industry, KUFPEG continues to invest in training and technology at all levels The company has arranged this year to develop and implement in early 2002 a comprehensive Management Training Program. We are also developing leading steer earning systems to enable all staff to maximize their technical and self-development skillsFinancial Statement “our mistion ix wll established, but does boar repeating. We are to ineraase the wa af the Company tothe State of Kuwait by profitability exploring for and producing hydrocarbons internationally: Aud our key aeauegic objecties ave praduction of 100,000 boepd om a 410 million hoe rescroes base: 10% average profit growths and average return of 10% aver 10 years.” Musaad AbSa00d awe Att Managing itr (he Hina eerCONSOLIDATED FINANCIAL STATEMENTS: nded December 31, 2001 with Auditor's Report ; CONTENTS . Auditor's report Exhibit Consolidated balance sheet A Consolidated Statement of income: B Consolidated statement of changes in shareholder's equity c Consolidated statement of cash flows Dd \ PagesAuditor’s Report oe ANDERSEN AbBasie & Go P.O. Hox : 2115 Safat 13022 - State of Ku "Tel (968) 2410010 Fax : (965) 2812761, ‘The Shareholder Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed) State of Kuwait T have audited the accompanying consolidated balance sheet of Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed) and Subsidiaries as of December 31, 2001, and the related consolidated statements of income, changes in shareholder's equity and cash flows for the year then e 4. These financial statements are the responsibility of the company’s management, My responsi pinic ity is to express an these financial statements based on the audie ‘The audit was conducted in accordance with International Standards on Auditing. Those standards roquire that I plan. and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes exami 16, on a test basis, evidence supporting the amounts and disclosur Financial statements, An audit also includes assessing the accounting principles used and signifieant estimates made by management, as well as evaluating the overall fi {al statoment presentation. I believe the audit condueted provides py ‘reasonable basis for wy opini In my opinion, the financial statements referred to ubove present f yin all material respects, the financial position ‘of Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed) and Subsidiaries ax of December 31, 2001, and the results, of th 1+ operations and their cash flows for the year then ended in conformity with International Acca ing Standards Also in my opinion, the statements include the disclosures required by the Commercial Companies Law and the Company's Artie 1 of Association, and [obtained the information I required to perform my audit. In addition, proper books of account have been kept, physical stocktaking was carried out in accordance with recognized practice, and the account a information given in the Directors’ Report is in agreement with the books of account, According to the informatio available to me there were no contraventions during the year of either the Commercial panies Law or of the Companys Arti jes of Association which might have materially affected the Group's financial position or results ofits operations, Bader Al-Bazie State of Kuwait Licence No. 1-8 April 4, 2002 Member of Andersen WorldwideForeign Petroleu And Subsidiaries State of Kuwait Exploration Company K.S.C. (Closed) CONSOLIDATED BALANCE SHEET December 31, 2001 ASSETS. Gash on hand and call accounts Funds held by parent Accounts receivable and other debit balances Due from parent and its subsid Investment in unconsolidated subst Inventories 'y companies Total current asects Other non-current assets Future income tax benefit Oil and gas properties: Producing properties Workin-progress ized assots Cost Leas: Ace LIABILITIES AND SHAREHO} Current liabilities: payable and other credit balances Provision for taxation ‘Total current liabilities DER'S EQUITY Accoun Provision for restoration expenses (Gekierattarea creat nbaitice Provision for employees’ terminal benefits Deferred tax liability Shareholer's equity: pital ary remote Si Voluntary reserve Foreign currency transla Retained earnings ‘Total sh adjustments holder's eq Bader ALKhashti Gairman and Managing Director tan integral part of the co ng notes a Note n 2 13 wolidated financial statements 2001 KD. 0,552,886 59,411,138, 11,682,250 110,263 184,596 20.54 86,721,187 24,139 419,738 142,875,268 41,823,910 184,099,178 8,210,035, 24,597,188 20,004 24,567,882 8,008,586 1,845,112 1,097,144 2,994,074 200,000,000 21,242,008 239,124,350 2,68 Exhibit A 2000 Kp aasTa36 95,265,980 13,826,035 26,799 181,873 4,610,420, 115,427,104 42,996 77018,008 2,624,110 (2,043,460) 580,650 767,196 18,197,610 133,671 13,331,281 3146228 277,601 1.142.430 2,387,746 200,000,000 3,020,684 9.619.963 925,481,850 248,767,196CONSOLIDATED STATEMENT OF INCOME Exhibie B Year ended December 31, 2001 2001 2000 ip KD Sales TO610.949 68,735,952 Cont of salen (11247203) 57,488,749 Gross profit Expenses and charges Exploration 10,649,615 Goneral and administrative 4 4.078.457 3,502,104 Depreciation, depletion and amortization 14,003,670 12,117,998 (Release of provision) Provision for restoration expenses (230,090) 290,310 28,501,052 26,616,615, Profit from operations 26,093,481 80,872,134 Incerest income 4.758.418, 6,198,103, Other income 26,969 13,537 Foreign currency exchange gain / (lose) 482.638 (94,512) Profit for the year before taxation 31961856 36,989,262 Taxation 15 (5,402,821 (3,688, oI Not profit for the year 26,558,636 82,800,896 The accompanying notes are an integral part of the consolidated financial statementsKuwait Foreign Petroleum Exploration Company K.S. ‘And Subsidiaries State of Kuwait (Closed) CONSOLIDATED STATEMENT OF CHANGE! Year ended December 31, 2001 IN SHAREHOLDER’S EQUITY Exhibit Foreign Retained currency earnings Statutory Voluntary translation (accumulated Capital reserve serve adjustments losses) Total KD Kp KD KD KD KD Balance at December 31, 1999 200,000,000 1,824,126 1,824,126 6,937,282 (20,269,817) 1 90,315,607 Net exchange differences forthe year : 865,287 Not profit for the year : : 52,800,896 $2,800.86 "Transfer to reserves : 1,205,558 1,205,558 : (2.411.116) Balance at December 31, 2000 200,000,000 3,029,684 3,029,684 7,802,519 9,019,963 229,481,850 Dividend payment to KPC : (9,619,963) (9,619,963) Net exchange differences for the year (1,296,164) (1,200,104 Net profit for the year : Transfer to reserves : 26,558,636 26; 2.658.814 (5,316,628) : 5.687.998 6,506,355 21,242,008 .ce at December 81,2001 200,000,000 5,687.9 ‘The accompanying notes are an integral part of the consolidated fin 201» Company K.S.0. (Closed) CONSOLIDATED STATEMENT OF CASH FLOWS Exhibit D Year ended December 31, 2001 2001 2000 KD. KD. Cash flows from oper Profit for the year before 81,961,436 36,080,262 Adjustments for: Depreciation, depletion and amortization 14,003,670. 12,117,998 Write-offs of oil and gas prope 10,649,615 10,757,203 secest income (4,758,418) (6,198,103) (Release of provision) provision for restoration expenses (137.642), 239,310 Provision for employees’ terminal benefits 1337860 Operating peofit before working cupital changes 51,852,407 54,209,164 Decrease in accounts recievable and other debit balances 2,124,759 1,675,431 Increase in inventories (1.210.134) (787.274) Tnerease in accounts payable and other eredit balances ues __2.179,206 Cash generated from operations 64,613,829 87,276,527 ‘Taxes paid (4:706,270) (6,620,100) Employees’ terminal benefits paid (179.072), (91,834) Directore’ fees paid (24,500), (24,500) Net eash from operating activities 59,703,987 _ 51,540,093 Cash flows from investing activities: Purchase of fixed assets (517.128) (956,610) Increase (decrease) in funds held by parent 88,854,202 (12,592,680) Additions to oil and gas properties (81,934,148) (44,310,462) Increase (decrease) in other non-current assets 15.637 Interest received 5.912.236 Net cash used in investing activities (42,669,196) _ (51,782,541) Cash flow from financing Dividends paid to parent company (9.619.963) Decrease in amounts due to parent and its subsidiary companies (98,402) Increase in amounts due from parent and its subsidiary companies (29.408) Net cash used in financing activities (9,643,427) (28,402) Effect of foreign currency translation (1,296,168) 965,287. Net increase in eash on hand and call accounts 6,095,200 584,437 Cash on hand and call accounts at beginning of the year 3.457.196 872,699, Cash on hand and call accounts at end of the year 9.552.336 457,136 ‘The accompanying notes are an integral part of the consolidated financial statements 30.y K.S.C, (Closed) State of Kawai NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 1. Organization and of Kuwait Foreign Petroleum Exploration Company (KUFPEC) K.8.C. (Closed) “the Company” was rogistered in Kuwait in 1981 as a wholly owned subsidiary of Kuwait Petroleum Corporation (KPC) and its registered address is P.O. Box 5291 Safat, 13053 - State of Kuwait. The Company is engaged in the exploration and development of oil and as outside Kuwait At December 31, 2001, the Group had 178 employees (2000 - 166 employees) and staff costs for the year then ended KD 4.3 million (2000 KD 3.7 ion). The consolidated financial statements were authorized for issue by the Chairman and Chief Financial Officer on Iehalf of the Board of Directors on April 4, 2002. The General Assembly hus the power to a statements after issuance ind these financial 2 Signifi ing polick ‘The accompanying financial statements have been prepared in accordance with the accounting standards nting Standards Committee (IASC). Si issued by the International Acco icant accounting policies are summarized as follows: 8) Basis of preparation ‘The financial statements are presented in Kuwaiti Dinars and sre prepared under ‘except that investments availablefor-sale are stated 1 policies have b applied by the Group and, except far the change in accounting policy indicated in (Note 20), are con those used in the provious year he historical cost convention, fair value, The accou bb) Basis of consolidation ‘The consolidated financial statements incorporate the financial statements of KUFPEG K-S.C. (Closed) and ite holly owned subsidiary companies (Note 18). 5 Control exists when the Company has the power, directly or indirectly, to govern the financial operating policies of an enterprise so as w obtain benefits from its activities. The financial statements of subsidiaries Dsidiaries ure those enterprises controlled by the Company: and ate included in the consolidated fina ial statements from the date that conteol effectively commences until the da that control offectively ceases. Intercompany balances and transactions, including mpany profits and unrealized profits and losses are eliminated on consolidation. Consolidated fina statements are prepared using uniform acco ing policies for like transactions and other events During the year 2001, the Company acquired 50% of the outstanding common stock of “Premier KUFPEG Pakistan (PKP B.V.)” for a cash price of USS 107,467,025 (equivalent to KD 33,063,305) representing US$ 105,000,000 paid for acquiring oil and gas properties and US$ 2,467,025 ring working eapital, The acquisition was funded with existing cash. The excess of purchase over the net assets book values acquired war KD 23,890,516 and h 1s been allocated to the acquired oil and gas properties During the year ended December 31, 2001, PKP BY. contributed revenues and net income of KD 6,646,584 and KD 1,575,517 respectively to the consolidated results for the year. gor accounting {gas exploration and producing activities are accounted for using the ‘successful efforts’ method of ing. Under this method, geological and geophysical costs are expensed as incurred during the on phase. Exploratory drilling costs are tentatively capitalized pending determin. finds proved reserves, Wells which are assigned proved reserves remain capitalized. All other exploratory we ‘and exploration expenditure including licence fees are expensed. ion of whether the well All expen equipment and mineral interest in properties is capitalized. Such expenditure is depreciated, depleted and amortized using the unit of production method. re for development, including seismic geological and geophysical studies, wells, related plant and. ed costs over the Provision is made for restoration expenses related to abandonment of fields based on esti estimated remaining commercial reserves of the relevant ficld on a unit-of-produetion basis.Kuwait Foreign Petroleu And Subsidiaries State of Kuwai Exploration Company K.$.C. (Closed) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 4) Accounts receivable Receivables are stated at face value, after provision for doubeful debes ¢) Tnvestenents Investments are initially recogaized at cost, being the fair value of the consideration given, which is measured using 9 inehuding all acqui settlement d ted with the investment Js availuble-forsale are measured at fair value, The fair value rent bid priee. is determined After initial recognition, investmes of investments t For investments where there is no quoted market pi by reference to the current market value of a discounted cash flow analysis, Investments whose fair value ¢ il markets is their qu he iad mara! price Based te of fair val ce, «reasonable estim other instrament that is substantially the same of is based on less impairment losses. edd 1y amount in equity that relates to that investment Any gain or loss arising from a change in the fair value of investments classified as available for-sale is recog in equity. When an available-for-sale investment is disposod of, fe ist red to the statement of income in calculating the gain or loss. Amounts in equity are also transferred to the statement of income whenever the investi 1) Inventories Crade ol is valued at the lower of cost or net realizable value. Other inventories comprising mainly of spare parts, materials and supplies are valued at cost, determined principally on a weighted average cost basis, loss allowance for te oF slow moving items, 2) Joint Ventures Where the Group's oil ts ro fen are conducted jointly nd gus exploration and producing activi only the proportionate interest in such 1h) Fixed assets Fixed assets are stated at cost less accomulated depreciation and impairment losses. When assets ure sold ‘or watiead, their cost and a fare eliminated from the accounts and any gain or sumulated depreciatio nent of income, toss resulting from their disposal is included in the sta Depreciation is computed on a straight-line basis over the estimated useful lives of the assets Phe useful life and of dep) yon The carrying amounts of the Group's assets, other than inventories, are reviewed at each bi ation method are reviewed periodically ensure that the method and period ¢ benefits fr p sistent with the expected pat items of fixed assets rn of econo paiement of assets lance sheet date determine whether there ix any indication or objective evidence of impairment. If any such indication or evidence exists, the asset's recoverable amount is estimated and an impairment loss able amount is recognized in income whenever the carrying amount of an asset exceeds its recov The recoverable amount of the Group's receivables is calculated ax the present value of expec future cash flows, discount effective imterest rates inherent in the asset. dat the origi Receivables with a short duration counted, The recoverable amount of other assets is the higher ‘of an asset's net selling price and value in use, The net selling price is the amount obtainable from the sale of arm's longi cash flows expected to arise from the conti its useful life. Recoverable amounts are estimated for individual assets or, if it is not possi cash-generating unit, Reversal of impairment losses recognized in prior years is recorded when there is an indication no Longe an asset ransaetion while value of estimated future use is the presei wing use of an asset and from ite disposal at the end of Ne, for the that the impairment losses recognized for tl fexint or has decreased, The reversal ix i) Accounts payable Accounts payable ure stated at their costKuwait Foreign Petroleum Exploration Company K.S.C. (Closed) ‘And Subsidiaries State of Kuwait NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 k) Employees! terminal benefits Provision is made for amounts payable to employees under the Kewaiti Labor Lave, the Kuwait Social Security Law land the Company's terms of employment. This liability, which is unfunded, represe is the amount payable to each mployes us « result of involuntary termination on the balance sheet date, and approximates the present value of the final obligation, 1) Revenue recogni Revenue from the sale of vil and gas is recognized on completion of the sale transaction. sm) Royalties fare accounted for in the stat and Royalti tae included within operating expe ‘of income in the same period as the income to which they reli n) For Jign currencies Foreign currency transactions are recorded in Kuwaiti Dinars at fixed exchange rates, which approximate average tates throughout the year) Monetary assets and liabilitios in foreign currency at the balance sheet date are translated Dinars at the rates of exchange prevailing satemont of income. Assets and liabilities, both monetary and non-monetary of foreign subsidiaries are tr to Kuwaiti Dinars at the exchange rates prevailing at the balance sheet date. Operating results of such subsidiaries lave translated at average rates of exchange for the subsidiary’s period of operations. The resulting exchange diary, to Kuwai that date, Exchange differences are recognized in th lated differences are accu sub ated in a separate section of shareholder's equity until the disposal of th 10) Taxes on income Gortain of the Company's subsidiaries are subject to taxes on inc Provision for deferred taxation is mad for the timing differences when required. in various foreign jurisdictions. Taxes payable are provided on taxable profits atthe curr between financial and income tax report p) Use of estimates ‘The preparation of financial statements i d assumptios agent assoes and liabi ynformity with International Accounting Standards requires management to make estion ities and disclosures of that affect she reported amounts of assets and lit joe at the date of the financial statement the reported amounts of revenues and s during the reporting period. Actual results could differ from those estimates 4) Financial instruments ables ims are disclosed in the respective the balance sheet include cash and eall accounts, ree Financial assets and financial liabilities carried o 4 measurement of thes ‘and payables. The acc ng policies on recognition a ‘accounting policies found in this Note. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement, Interest, dividends, gains, and losses relating o a financial insirument classified as « ability are feported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly « equity. Financ imtonds to settle either on a net basis or to real instruments are offset when the Group has a legally enforceable right to offset and the asset and settle the Liability simultaneously *) Contingencies A contingen is probable. 1 is not recognized in the financial statements but disclosed when an inflow of economie benef Comti acial statements. They ‘an outflow of resources embodying economic benefits is remot nt liabilities are not recognized in the f e disclosed unless the possibility of 3. Funds held by parent Funds held by parent represent surplus funds generated from operations and advanced to KPC. ‘There are no restrictions on these funds and interest is earned based on the prevailing market rates, which is approximately 4.4% p.a. (2000 - 7% p.a.). Interest earned during the year amo KD 47 million (2000 KD 6. million). ted to approximatelyKuwait Foreign Petroloum Exploration Company K.S.C, (Closed) And Subsidiaries State of Kuwait NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 Other receivables Accrued interest Due from joint Venture participants Prepaid expenses ivables Provision for rv 5. Investment 2001 Kp 4,697,932 (178,959) 294,529 6.920.725, 380,682 __ (472,650) 11,642,250 2000 KD 6,865,704 628,871 1,448,347 4,400,597 896.456 13,826,035, ‘This represents « 100% equity interest in KUFPEC Seram Ltd, “formerly Adantic Richfield Seram Led, (ARCO)”, company in ‘The investment has boen excluded frot orporated under the Jaws of the Baba ‘consolidation as it was acquired a 1as und owns a 52.5% interest in the Sera j d held exclusively with a view to its disposal in the near future. fa the opinion of management, the fair value of the investment is not less than its carrying amount which represents the cost of acquisition, Crade oil Spare parts, materials and supplies Spare parts, m rials and supplies are used Cost Balance at beginning of the year Exploration and development expenditure during the year Write-offs Currency translation effeces Balance at end of the year Deprec ion, depletion and amortization Balance at beginning of the year Charge for th PKP BN. acquisition Reversal of impairment loss provision Charge to PRP BLY. (50%) Gurren Balance Net book value translation effect of the your 2001 Kp 1,507,089 4.313.405 5,820,554 operations and are not held for re-sale 2001 KD 288,036,907 89,451,551 (10,649,615) 1,520,073, 318,359,816 110,942,790. 13,679,458 5,826,157 314,912 2,807,812 133,000,038 184,699,178 2000 KD 1,808,980 3.241,440 4,610,420 2000 KD 204,483,048 48.261, (10,257,203) 1,028,633 283,030,007 199,005,291 12,084,174 (740,066) 110,083; 127,094. In accordance with the poliey outlined in Note 2 (i), an impairment test was carried out at December 31, 2001 using unescalated and undiscounted estimates of future net revenues detived from wil und gus priees, exchange rates and cost levels ruling at that date.Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed) And Subsidiaries State of Kuw NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 8. Accounts payable and other credit balances 2001 2000 — xD Joint Venture aceruals 28,821,502 8,605,798 Accrued payroll and leave pay 151,923 430,085, Others 1,073,768 __ 4,161 24547188 —__ 13,197,010 9, Provision for restoration expenses Proviston for restoration ospentce 2001 KD Balance at beginning of the year 3.140.228 Charge for the year 135,443, Provision write back (273,085) Balance at end of the year 8.004 10, Provision for employs 2001 KD. Balance at beginning of the year 1,192,430 Charge for the year 291,727 Provision write hack 7,941) Payment during the year (179072) _(91,834) Balance at end of the year 1,097,144 1,142,490 Employees terminal benefits inch lean amount of KD 7,131 (2000 - KD 43,280) payable to key management personnel u pital “Authorieed, issuod and fully paid-up capital consists of 200,000,000 shares of KD 1 each. (2000 ~ 200,000,000 shates). 12, Statutory reserve Tn accordance with the Commercial Companies Law and the Company's Articles of Association, 10% of annual profit is transferred tn the statutory reserve. The Company may discontinue such transfer when. reserve equals 50% of the capital. The statutory reserve is not available ford Articles of Associ sn excopt in casos stipulated by law and the Ce 13, Voluntary res ‘accordance with the Cor Such « pany’s Articles of Association, 10% of annual profit i= ferred to the voluntary reserve. for may discontinue by a resolution at the General Assembly. 14. General and administrative Included in general and administrative expenses is Directors’ fees in the amount of KD 24,500, whi the approval of the Ge sare subject toKuvait Foreign Petroleum Exploration Company K.8.C, (Closed) And Subsidiaries State of Kuwait NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 2001 2000 KD KD Current tax 4,092,699, 4,122,382 Provision write back (264,35: Deferred tax liability 1,574,476 5,402,820 the normal fand call accounts, ss, the Croup uses primary financial instruments such as cat reecivables and payables and as u result, is exposed to the risks indicated be ow, The Group currently does not use to these risks derivative financial instruments to manage its exp Intorest rate risk F ‘The effec cial instruments are subject to the risk of changes in value due to changes in the level of interest. i r Ne ancial assets and liabil ve interest rates and the periods in which interest bearing tare repriced or mature are indicated in the respective notes reat rate of approximately 4% pa Credit risk Gredtit risk isthe risk that one party to a financial instrament will fal to discharge an obligation and cause the other oup to credit risk consist prineipally party to incur a financial loss, Financial assets which potentially subject the of cash at ban and accounts receivable, The Group's eash in placed with high credit rating financial institut receivables are presented net of allowance for doubiful debts Fo The than the Kuwaiti Dinar. The Group ensures that the net exposure is kept 10 an acceptable level 9 currency rink roup ineurs forsign currency risk on transactions that are denominated in @ curt idlity and cash flow risks ity risk isthe risk that the Group will encounter difficulty in raising funds to meet commitments associated with, ‘astruments, ‘To manage this risk, the Group periodically assesses the fi wil viability of customers Cash flow risk is the risk that fu instrument will fluctuate in 6 cash flows associated with monetary financi vup has no significant exposure to cash flow risk, amount, At preseat, the Gi Pair value of fin At December 31, the fair value of financial instruments approximate their carrying amounts 36Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed) And Subsidiaries State of Kuwait NOTES TO CONSOLIDATED FINANCIAL STAT! December 31, 2001 MENTS, 17. Inyestment in Joint Ventures The Group b uros in respect to its exploration and production activities. The Group's share of the assets, Habilities and results of the Joint Ventures is summarized as follows: + interests in various Joint Ven 2001 2000 KD KD Total current assets Ta701aa2 “17,843,479 Oil and gas properties 184,609,178 127,094,108, Other now-eurrent assets 435,336 1687.55 ‘Total current liabilities 20,070,841 10,380,934 Non-ourrent liabilities 748,871 5,962,016 57,829,950 21,714,560 56.22 402,820 4,688,806 Gross profit Operating expenses Other (income) / expenses Taxation 18, Principal subsidiary companies The principal owned subsidiar of Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed) that are included in the accompanying consolidated financial statements are as follows Name of company KUFPEC Services, K.S.6. (Close Kuwait KUFPEG (China) Ine. Panama KUFPEG (Italy) Ltd United Kingdom = KUFPEC (Egypt) Led. Cayman Islands KUFPEC (Indonesia) Led. Cayman Islands KUFPEC (Algeria) Led. Cayman Islands KUPPEC (Pakistan) Led. Islands KUPPEC (Sudan) Led Islands KUFPEG (Tanzania) Led Islands KUFPEC (Tunisia) Led. Islands KUFPEG (Malaysia) Ld. Cayman Islands = KUFPEC (Yemen) Lid Gayman Islands KUFPEC (Aden) Lid. Cayman Islands KUEPEC (Sumatra) Led. c KUFPEC (Vi yman Islands sam) Lt Cayman Islands swanda) Led. Cayman Islands ‘al Energy Development Corporation (Congo) Ltd Bermuda a (Egype) Lie Bormud International Energy Development Corporation (Sudan) Ltd Bermuda = International Energy Development Corporation N.A. Holdings N.Y. Netherlands ray Development Corporation BV. Netherlands: International Energy Development Corpora: KUFPEC Austealia Pry Ll Australi KUFPEG (Italy) BLY. Netherlands KUFPEC (Finance) BN. Netherlands ‘Varanvs Pay Led Australia KUFPEC (Perth) Pry Lid Austral Premier KUFPEC Pakistan BY Netherlands aKuwait Foreign Petroleum Explorar And Subsidiaries State of Kuwait NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 19. The oil gas reserves ut the balance sheet date are as follows: 2001 2000 oil Gas oi Cas MMBBL BCE MMB BR Proven reserves 6418 69868 81.76. 593.20 Probable reserves 24762 39.03 25, 69.85 940.25 70.79 605.51 Proven roerves are the quantities of crude oil natural gus and natural gas liquids which gelogicel and engincering 4 economic and operating conditions, demonstrate with reasonable certainty to be recoverable in future yeurs from known reservoirs wn Probable reserves are those additional reserves which are wot yet proven but together with proven reserves are estimated to have a 50% or better cha ly produeible. ce of being technically and economi Oil reserves include the oil equivalent of natural gas liquids, Oil and gas reserves cannot be measured exactly since imation of reserves invalves subje ive judgment and arbitrary determinations. Therefore, all estimates are subject 10 periodic revision account January 1, 2001, the Group adopted IAS 39, Financi The adoption of IAS 39 has resulted in the Group categorizing its investment in unconsolidated subsidiary as investment available for-aale, That investment ix accounted for using the respective policy indicated in I Instruments - Recognition aad Measureme Note 2-c. This change has no effect on the opening balance of retained earnings or net profit for the year, sents under various joint ventures for future exploration and development expenditure amount to approximately KD 107 million (2000- KD 104 million) 22, Contingent asset ‘The Company has pursued a claim against [rag for the recovery of the total losses sustained as a result of the land occupation of Kuwait in 1990-91. Accordingly, a claim for USS 14,843,000 (KD 4,566,597) was lodged with Public Authority for Assessment of Compensation through Kuwait Petroleum Corporation which has been approved nil sent to the United Nations Compensation Commission, The accompanying consolidated fin .ot inelude amounts related to this claim. 28. Conti wont Habilities At December 31 001, KUFPEG Australia Ply Led. had « first floating cross charge over its assets covering the company’s interest in the Palm Valley gas field. All participants have executed and r participants, to cover potential payment defaults to the joint venture. Similarly, pursuant to the company’s interest in a jo registered similar cross charges in favor of 9 venture in Australia encompassing production from the Harriet Field and various exploration permits, the company has entered into three deeds of cross charge in favor of each of the other participants for the purpose of securing the company’s obligations under the Joint Venture Agreement. The cross charges comprise « prior ranking charge over the company tralian $ 250 million (KD 39 mi \ezest in the joint venture toa limit of A ion) ‘The Directors proposed a cash dividend of KD 21,242,009. This proposal is subject to the approval af the shareholders ‘eneral Assombly 25 Comparative Certain prior year figures have been reclassified to conform with the cu: font year presentation,Staff’s Children Drawing Contest on KUFPEC’s 20th Anniversary Waterfall &Mountain Lester Fernan Kuwait__ Former Board of Directors 2000 11s my privilege to place on recard sincere appreciation and ‘heart fol thanks for the guidance and support extended by ihe former Chairean and Board of Direciors during the year 2001. Bader N.ALKhoaht Chairman and Managing Deter Executive Directors Mr. Ahmed R. AL-Arbeed iairman and Managing Director Mr. Abdullah M. Baroun Deputy Chairman Non-executive Directors Mr. Wael M.J. Al-Modhaf Ministey of O11 Mr. Abdulla B. Al-Kaloo Kuwait Petroleum Gorporation Mr. Bader N. Al-Khashti Kuwait Oi1 Company Mr. Osama H. ALIasa Kuwait National Petroleum Company Mr. Nayef 8. AL-Dhafiri Kuwait Oil Tanker CompanyCorporate Directory Pee ene ry Creo tee Peres Peete ot oe eon econ a Cree? cee) Sr Kuwait Petrote eee ny Pea ct een Bankers The National Bank of Kuwait Se eee ence? Arthur Anderson ALBazie and Company Eee eee er eer Perr Roe een aa et eee Pere AUSTRALIA oer Po RAC UanN ooo e eer Soe Cea eros PONY RU een eee? Menara Citibank, Jakarta 12010 CoN Eee ENN Re et eee ne TN oe cooon cc ee ee aa Peo omen TUNISIA Rene at inno: 2nd Floor Pee ere eons eee eer ree Tunis, TUNISIA on emmee On EY Sore ay eet ene er ee reeee ey Sree et er eee ee eee een Te eae RON TYAU) de POR nce ee Geto)