20 Aug 2010 07:14
PRESS - RELEASE
JSC KazMunaiGas Exploration Production announces the result of the dispute
regarding JSC TurgaiPetroleum
Astana, August 20, 2010. JSC KazMunaiGas Exploration Production ("KMG EP" or "the Company") announces that on 16 August 2010 PetroKazakhstan Inc. ("PKI") and Lukoil Overseas Kumkol B.V. ("Lukoil") have entered into Amicable Agreement (hereinafter - the Agreement) on the dispute regarding JSC Turgai Petroleum ("TP").
Main agreement
The dispute between Lukoil and PKI arose in 2005 over Lukoil's pre-emption right to acquire 50% stake in TP. On 28th October, 2009 the Stockholm Chamber of Commerce issued the Final Award (Case No. V (066/2004)). The circumstances of the arbitration were described in the Circular to shareholders and GDR holders on the acquisition of PKI dated 24 September, the corresponding KMG EP press-releases as of 6 November 2009 and Financial Statements for 2009 full year results announced on 1 March 2010, which are available on the Company's website (http://www.kmgep.kz). Due to the dispute, PKI ceased consolidation of TP's results in its financial statement for 2010.According to the Final Award Lukoil was entitled to acquire 50% of TP from PKI and compensation by way of damages and accrued interest to such damages.
According to the Agreement the ownership structure of TP remains unchanged: PKI and Lukoil will continue to jointly own TP in equal shares. Furthermore, PKI shall pay to Lukoil the settlement amount of approximately US$438 million as compensation.
Separately CNPC Exploration and Development Company Limited ("CNPC E&D") and KMG EP entered into an agreement on principles (the "AOP") on 28 July 2010. In accordance with AOP the payment of compensation to Lukoil will be financed by PKI. It was also agreed by KMG EP and CNPC E&D in the AOP that CNPC E&D will hold harmless KMG EP in respect of any liability in relation to such loan and any loss relating to such liabilities, including loss of interest or dividends, will be reimbursed by CNPC E&D to KMG EP.
Locked dividends of TP
As a result of the Arbitration between Lukoil and PKI, from 2008 TP stopped distribution of its dividends to its shareholders. In the framework of the Agreement PKI and Lukoil agreed a set period of time to solve the issue of distribution of the dividends from TP. KMG EP will be entitled to be credited with its portion of the dividends from TP via its holding in PKI.
Other agreed items
CNPC agreed that KMG EP will increase its presence in the management of PKI group of companies which will allow improving involvement of KMG EP in the day to day operations of PKI group.
Under the Amicable agreement the final settlement is subject to certain conditions to be fulfilled by PKI and Lukoil as well as Court of Queen's Bench of Alberta, Judicial District of Calgary in Canada approval of the consent orders. Expected time for the final settlement is 25 of August after which KMG EP will provide further details of the Agreement.
NOTES TO EDITORS
KMG EP is among the top three Kazakh oil and gas producers. The overall production in 2009 was 11.5mmt (an average of 232kbopd) of crude oil, including the Company's share in Kazgermunai and CCEL. The total volume of proved and probable reserves, as at the end of 2009 was 234mt (1.7bn bbl), excluding the relevant proportion of reserves at Kazgermunai, CCEL and PKI; including the share of reserves from Kazgermunai, CCEL and PKI the 2P reserves were about 2.2 bn barrels. The Company's shares are listed on the Kazakhstan Stock Exchange and the GDRs are listed on The London Stock Exchange. The Company raised over US$2bn in its IPO in September 2006. In July 2009, the International rating agency Standard & Poor's (S&P) confirmed KMG EP's "BB+" corporate credit rating and assigned the Company a "GAMMA-6" rate.
PKI ("PetroKazakhstan") is involved in exploration, development and production of hydrocarbons as well as sales of oil and oil products. PetroKazakhstan also has stakes in 16 oil fields, 11 of which are at different stages of development. In 2009 it produced 6.3mt (134kbpod, including share in TP). The second shareholder of PetroKazakhstan is CNPC Exploration and Development Company Ltd. (CNPC E&D) which owns 67% of the company.
TP owns licenses to explore and produce hydrocarbons from the Kumkol North and East Kumkol oil fields. In 2009 TP produced 3 mmt (an average of 68kbopd). As at 31 March 2009 the total volume of TP's proved and probable reserves was 104.4 mmbbl (KMG EP's acquired interest is 17.2 mmbbl).
For further details please contact us at:
«KMG EP». Public Relations (+7 7172 97 7600)
Daulet Zhumadil
E-mail: pr@kmgep.kz
«KMG EP». Investor Relations (+7 7172 97 5433)
Asel Kaliyeva
E-mail: ir@kmgep.kz
Pelham PR (+44207 861 3147)
Elena Dobson
E-mail: edobson@pelhambellpottinger.co.uk
Forward-looking statements
This document includes statements that are. or may be deemed to be. ''forward-looking statements''. These forward-looking statements can be identified by the use of forward-looking terminology. including. but not limited to. the terms ''believes''. ''estimates''. ''anticipates''. ''expects''. ''intends''. ''may''. ''target''. ''will''. or ''should'' or. in each case. their negative or other variations or comparable terminology. or by discussions of strategy. plans. objectives. goals. future events or intentions. These forward-looking statements include all matters that are not historical facts. They include. but are not limited to. statements regarding the Company's intentions. beliefs and statements of current expectations concerning. amongst other things. the Company's results of operations. financial condition. liquidity. prospects. growth. potential acquisitions. strategies and as to the industries in which the Company operates. By their nature. forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur. Forward-looking statements are not guarantees of future performance and the actual results of the Company's operations. financial condition and liquidity and the development of the country and the industries in which the Company operates may differ materially from those described in. or suggested by. the forward-looking statements contained in this document. The Company does not intend. and does not assume any obligation. to update or revise any forward-looking statements or industry information set out in this document. whether as a result of new information. future events or otherwise. The Company does not make any representation. warranty or prediction that the results anticipated by such forward-looking statements will be achieved.