Kazmunaigaz Exploration Regulatory News (KMG)

29 Nov 2006 15:18

JSC KazMunaiGas Exploration Prod29 November 2006 KazMunaiGas EP announces its financial results for the first six months of 2006 Astana, 29 November, 2006 • Net income from continuing operations up 76% in the first six months of 2006 • Production growth of 2%, with stable production levels expected in 2007 • Reduced capital expenditure planned for 2007 • Potential acquisition of 50% of Kazgermunai in Q1 2007 The Board of Directors of JSC KazMunaiGas Exploration Production ("KMG EP" orthe "Company") has approved the Company's financial results for the first sixmonths of 2006 and has reviewed a number of operational and organizationalissues. Profit for the period from continuing operations after tax (net income) was 50.2billion Tenge, 76% higher than in the first six months of 2005. The growth innet income was driven by favorable oil market conditions, production growth,continued cost control and release of certain accruals made in earlier periods. Commenting on the financial results for the first six months of 2006, AskarBalzhanov, the CEO of the Company, said "We are pleased with the results for thefirst six months of the year as the Company managed to capture the strong exportmarket environment by increasing production and maintaining control over costs". The Company revenues for the first six months of 2006 increased by 34% year onyear to 200.2 billion Tenge. This growth was due to a production increase of 2%to 4.65 million tonnes (190 kbopd) and a 30% increase in the average realisedprice from 32 780 Tenge per tonne (34.15 USD per bbl) to 42 770 Tenge per tonne(46.03 USD per bbl). The average realised price increased primarily because ofimproved export prices. Exports accounted for 71% of sales in the first sixmonths of 2006 in volume terms (71% in the first six months of 2005). Operating expenses in the first six months of 2006 were 80.4 billion Tenge whichis 3.0 billion Tenge (3.6%) less than in the same period in 2005. The reductionin operating expenses was primarily due to a release of an environmental fine of11.4 billion Tenge which was successfully challenged by the Company in court in2006. This was partly offset by higher depreciation, depletion and amortisation,increased taxes other than income tax, higher energy, employee benefits,materials, transportation and other costs. Operating cash flow was 38.3 billion Tenge in the first six months of 2006 or 1%less than in the same period of last year as the improved pre-tax operating cashflow was offset by almost a three-fold increase in income tax paid from 28.8 bnTenge in the first six months of 2005 to 79.8 billion Tenge in the first sixmonths of 2006. Purchases of property, plant and equipment (capital expenditures, not includingpurchases of intangible assets, as per Cash Flow Statement) in the first sixmonths of 2006 were 22.3 billion Tenge or 8.8% less than in the same period of2005. The reduction was due to the planned continuing decrease in purchases offixed assets. Cash, cash equivalents and financial assets at the end of June 2006 amounted to96.6 billion Tenge. Short term and long term borrowings were 57.9 billion Tengeat the end of the period. Production and capital expenditure plans for 2007. The Company has also announced its production and capital expenditure plans for2007, excluding the effect of potential acquisitions. According to the plans, the Company anticipates producing approximately 9.5million tonnes of crude oil in 2007, approximately the same volume as expectedin 2006. Achievement of stable production levels is to be attained by drillingnew wells and continued application of up-to-date technologies, includingenhanced oil recovery methods. Capital expenditures, not including purchases of intangible assets, are budgetedfor 2007 at 44.8 billion Tenge, representing a 16.9% decline in comparison tothe 2006 budget. The decrease in capital expenditures in 2007 is driven by theplanned completion of construction of certain production and socialinfrastructure facilities as well as a planned decrease in purchases of fixedassets. The Company is expecting to finalise its schedule for export and domesticshipments in 2007 in the next few weeks. Changes to the Board of Directors At an extraordinary general meeting of shareholders, called at the initiative ofthe core shareholder of the Company, the National Company KazMunaiGas ("NC KMG")and held on 24th November by proxy vote, Mr U.S. Karabalin, President of NC KMG,was elected as a new member of the Board of Directors. He replaces Mr Zh.N.Marabayev, until recently a managing director of NC KMG The Board of Directors unanimously elected Mr Karabalin its Chairman. Potential acquisition of a stake in Kazgermunai The Board of Directors was informed by the management about the potentialacquisition of a 50 per cent stake in LLP JV Kazgermunai from National CompanyKazmunaigas (NC KMG). KMG EP has engaged a group of external advisers to assistthe company in the assessment of the Kazgermunai opportunity, includingvaluation, due diligence and reserves audit. The acquisition price will bedetermined in negotiations with NC KMG after the completion of the valuation anddue diligence of the acquisition target. The transaction, if approved by theBoard of KMG EP, a majority of its independent directors and a majority of itsshareholders independent of NC KMG, is expected to be completed in the firstquarter of 2007. LLP JV Kazgermunai was formed in 1993 and holds exploration and productionlicences for the Akshabulak, Nurali and Aksai fields in the Turgai oil basin incentral Kazakhstan. At the end of 2005 the combined ABC1+C2 recoverable reserves(under Kazakh classification) of the three fields were approximately 52.6million tonnes (403 million barrels). In 2005 Kazgermunai produced 1.9 milliontonnes (37.5 kbopd) of oil and its estimated 2006 production is expected to beapproximately 50% higher. The shareholders of Kazgermunai includePetrokazakhstan and NC KMG, each with a 50% stake. *** Appendix Key operating and financial indicators of JSC KazMunaiGas Exploration Production Summary operating datathousand tonnes 6 months 2006 6 months 2005Crude oil production 4,650 4,565Crude oil exports 3,265 3,173Crude oil domestic 1,334 1,306 Summary Consolidated Balance Sheets Tenge Thousands 30 June 2006 31 Dec 2005 ASSETSNon-current assets 268,859,963 305,760,353 Current assets 163,578,306 130,623,355Total assets 432,438,269 436,383,708TOTAL EQUITY Equity holders of the Company 224,397,929 173,653,027Minority interest 79,480 79,536LIABILITIES 224,477,409 173,732,563Non-current liabilities 102,942,645 117,928,068Current liabilities 105,018,215 144,723,077Total liabilitiesTotal liabilities and equity 207,960,860 262,651,145TOTAL EQUITY AND LIABILITIES 432,438,269 436,383,708 Summary Consolidated Statements of Income For 6 months ended June 30,Tenge Thousands 2006 2005 CONTINUING OPERATIONS Revenue 200,236,681 149,692,266Operating expenses (80,357,834) (83,339,313)Profit from operations 119,878,847 66,352,953Finance income (expense) (4,532,891) 932,706Profit before tax and minority interest 115,345,956 67,285,659Income tax expense (65,126,467) (38,678,974)Profit for the period from continuing operations 50,219,489 28,606,685 DISCONTINUED OPERATIONSProfit for the year from discontinued operations - 591,426Profit for the period 50,219,489 29,198,111 Attributable to:Equity holders of the Company 50,219,545 29,112,756Minority interest (56) 85,355 Summary Consolidated Statements of Cash Flows For 6 months ended June 30,Tenge Thousands 2006 2005 Net cash generated from operating activities 38,327,707 38,841,120Cash flows from investing activitiesPurchases of property, plant and equipment (PPE) (22,347,702) (24,501,109)Purchases of held-to-maturity financial assets (15,178,661) (52,803,205)Loans granted to related parties - (26,000,000)Other 6,516,440 1,744,651Net cash used in investing activities (31,009,923) (101,559,663)Cash flows from financing activitiesProceeds from borrowings 412,120 64,817,175Repayment of borrowings (1,530,594) (8,451,810)Dividends paid to Company's shareholders (35,615) (19,349)Other (2,099,944) (1,197,960)Net cash from (used in) financing activities (3,254,033) 55,148,056 Netback analysis, 6months 2006 CPC UAS Other TotalSales volume, thousand tonnes 733 2,533 1,334 4,599Estimated market quote*, USD/bbl 65.69 61.23 n/a n/aAverage realized price, USD/bbl 59.91 56.72 17.40 46.03Adjusted realized price, net of transportation 54.47 50.70 16.03 41.44and selling expenses, USD/bbl Netback analysis, 6months 2005 CPC UAS Other TotalSales volume, thousand tonnes 775 2,397 1,306 4,478Estimated market quote*, USD/bbl 49.54 45.42 n/a n/aAverage realized price, USD/bbl 41.63 41.97 14.94 34.15Adjusted realized price, net of transportation and 37.94 36.02 11.39 29.31selling expenses, USD/bbl * CPC Blend for CPC shipments, Urals RCMB for shipments via Uzen-Atyrau-Samara(UAS) pipeline Reference information 6 months 2006 6 months 2005Average exchange rate USD/KZT* 127.07 131.21Exchange rate USD/KZT as of 31 December 2005* 133.77Exchange rate USD/KZT as of 30 June 2006* 118.69Barrels to tonnes conversion ratio for crude oil 7,36 *Source: KASE Notes to Editors JSC KazMunaiGas Exploration Production, headquartered in Astana, is the thirdlargest crude oil producer in the Republic of Kazakhstan in terms of annualproduction volume based on 2005 data*. The Company had proved plus probable oil reserves of approximately 1,515 millionbarrels as at 31 December 2005** and average daily oil production in 2005 of 188thousand barrels per day. The Company extracts hydrocarbon resources from 44oil and gas fields located in the Atyrau and Mangistau regions in westernKazakhstan and is also engaged in onshore exploration activities, concentratedin the same areas. The Company is majority owned by JSC NC KazMunaiGas ("NCKMG"), the national oil and gas company which is controlled by Kazakh state viastate holding company JSC Samruk. * Source: Kazakhstan Ministry of Energy and Mineral Resources ** Source: Gaffney, Cline & Associates report, produced using SPE/WPCdefinitions For further details please contact us at: KMG EP, Public Relations (+7 317 2 977 908, +7 3172 977 924)Lyazzat KokkozovaE-mail: pr@kmgep.kz KMG EP, Investor Relations (+7 3172 975433)Alexander GladyshevE-mail: ir@kmgep.kz Citigate Dewe Rogerson (+44 20 7638 9571)Martin JacksonDavid Westover Forward-looking statements This document includes statements that are, or may be deemed to be, ''forward-looking statements''. These forward-looking statements can be identifiedby the use of forward-looking terminology, including, but not limited to, theterms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'', ''may'', ''target'', ''will'', or ''should'' or, in each case, their negative orother variations or comparable terminology, or by discussions of strategy,plans, objectives, goals, future events or intentions. These forward-lookingstatements include all matters that are not historical facts. They include, butare not limited to, statements regarding the Company's intentions, beliefs andstatements of current expectations concerning, amongst other things, theCompany's and Kazgermunai's results of operations, financial condition,liquidity, prospects, growth, potential acquisitions, strategies and as to theindustries in which the Company operates. By their nature, forward-lookingstatements involve risk and uncertainty because they relate to future events andcircumstances that may or may not occur. Forward-looking statements are notguarantees of future performance and the actual results of the Company'soperations, financial condition and liquidity and the development of the countryand the industries in which the Company operates may differ materially fromthose described in, or suggested by, the forward-looking statements contained inthis document. The Company does not intend, and does not assume any obligation,to update or revise any forward-looking statements or industry information setout in this document, whether as a result of new information, future events orotherwise. The Company does not make any representation, warranty or predictionthat the results anticipated by such forward-looking statements will beachieved. This information is provided by RNS The company news service from the London Stock Exchange