Regulatory Announcement

6 Nov 2009 08:04



REGULATORY ANNOUNCEMENT

JSC KazMunaiGas Exploration Production ("KMG EP" or the "Company") acquisition of 33% stake in PetroKazakshtan Inc. ("PKI") from National Company KazMunayGas ("NC KMG"). 

Astana, 06 November 2009. Reference is made to the proposed acquisition of 100 per cent. of the share capital of KazMunaiGaz PKI Finance B.V. ("KMG PKI") from JSC "National Company "KazMunayGas" as described in the Circular to shareholders and GDR holders dated 24 September 2009 (the "Circular").

KMG EP understands that the Arbitration Institute of the Stockholm Chamber of Commerce (the "Tribunal") has issued an award (the "Award") in relation to the alleged pre-emption right of Lukoil Overseas Kumkol B.V. ("Lukoil") over PKI's 50% stake in JSC Turgai Petroleum ("TP"). 

The circumstances of the arbitration are described further in the Circular, which is available on the Company's website (http://www.kmgep.kz). See in particular page 22 of the Circular - Part II - "Risk Factors - Risk factors relating to the Group's business - Lukoil may exercise its pre-emptive right to acquire all of PKI's share in TP" and pages 45 to 46 of the Circular - Part III - "Information on KMG PKI and the Group - Litigation - Lukoil Litigation". 

KMG EP understands that pursuant to the Award an order has been made for PKI to transfer all of its shares in TP to Lukoil in return for net consideration in excess of US$300 million. This is a better outcome than was described in the Circular, where it was envisaged that the net consideration for PKI's stake in TP may have been limited to a nominal amount.

KMG EP has received no formal notice in relation to the finalisation of the proceedings culminating in the Award. Furthermore, it is not clear to KMG EP how PKI will react to the Award. The Company also understands that the transfer of PKI's share in TP to Lukoil will be subject to a pre-emption right by the Government of Kazakhstan pursuant to Article 71 of the Law of Kazakhstan No. 2828 "on Subsoil and Subsoil Use" dated 27 January 1996 (as amended). Depending on the exact terms of the transaction, KMG EP may consider asking NC KMG to exercise their pre-emption right in favour of KMG EP as stipulated in the Services Agreement between NC KMG and KMG EP.

It is the Company's belief that this development does not materially impact the rationale and the benefits of the proposed acquisition as described in the Circular.

Notes to Editors

KMG EP is among the top three Kazakh oil and gas producers. The overall production in 2008 was 11.95mmt (an average of 240kbopd) 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 2008 is 241mmt (1.8bn bbl), excluding the relevant proportion of reserves at Kazgermunai and CCEL; including the share of reserves from Kazgermunai and CCEL the 2P reserves are over 2.1 bn barrels. The Company's shares are listed on Kazakhstan Stock Exchange and the GDRs are listed on London Stock Exchange. The Company raised approximately US$2bn in its IPO in September 2006.

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 (+44 207 337 15 17) 

Elena Dobson 

E-mail: Elena.dobson@pelhampr.com 

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.