Kuwait Energy's liquidity options

Kuwait Energy is a small E&P company with its main production coming from Egypt, although the vast majority of its reserves are located in Iraq. The company is constrained in terms of liquidity and its options seem limited when it comes to refinancing the US$250mn notes in August 2019. 

KUWAIE is indicated at 93, after trading close to par at end-18. Kuwait Energy does not generate positive free cash flows and has limited liquidity. However, its valuable reserves in Iraq can be monetised through farmouts. 

One such transaction – a farmout of 15% of Block 9 in Iraq to Dragon Oil – is under way and, if completed on time, will generate US$100mn cash inflow. The recently announced acquisition of Kuwait Energy by Hong Kong-listed United Energy Group (UEG) will create a financially strong combined entity when and if finalised. The bonds seem to reflect a degree of uncertainty about both the farmout and acquisition.


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