JSC KazMunaiGas Exploration Production (“KMG EP”), has released its audited consolidated financial results for the year ended 31 December 2007.
Highlights
• 11.64% increase of crude oil production, including the Company’s share in associates
• 28% growth in net income to 157bn Tenge (US$ 1,282m)
• 17.9bn Tenge ($146m) increase in net income contributed from the Company’s 50% share of Kazgermunai
The CEO of KMG EP, Askar Balzhanov said:
“The fact that KMG EP achieved significant production and net income growth during 2007 is a reflection of the success of the Company’s ambitious acquisition strategy combined with a technical operational programme implemented on the core fields.
“The Company is confident of continuing this growth in future, through further value-adding acquisitions, operational activities and an expanding exploration programme.”
Production Highlights
The Company produced 10,639 thousand tonnes (216.91kbopd) of crude oil that was 1,118 thousand tonnes or 11.64% more than in 2006. The increase is primarily due to the acquisition of a 50% stake in JV Kazgermunai LLP (“Kazgermunai”) completed on 24 April 2007.
Excluding Kazgermunai and CCEL, for the full year ended of 2007 the Company’s production was in line with the production plan, at 9,530 thousand tonnes of crude oil (192.17 kbopd), approximately the same level as for the full year of 2006. For the full year of 2007, the Company supplied 9,585 thousand tonnes of crude oil (193.28kbopd) to the customers excluding oil produced by Kazgermunai and CCEL. Out of this amount, approximately 7,354 thousand tonnes (148.29kbopd) were supplied to export markets, 9.13% more than in 2006.
Financial Highlights
Profit after tax (net income) for the full year of 2007 was 157bn Tenge ($1,282m). This is 28% higher than for the full year of 2006. The net income increase is attributable to higher prices received for crude, a favourable movement in the export to domestic sales mix, inclusion of Kazgermunai results, increased financial income. These positive factors were partially offset by increases in foreign exchange loss and operating expenses as well as an increase in the effective tax rate.
KMG EP’s revenues for the full year of 2007 increased by 18% to 487bn Tenge ($3,974m). This was primarily due to an increase in sales volume of 3.2% and 13.9% increase in the average realised price from 43,498 Tenge per tonne ($47.71 per bbl) to 49,554 Tenge per tonne ($55.93 per bbl). For the full year of 2007 exports accounted for approximately 77% of the sales in volume terms (73% for the full year of 2006).
Operating expenses were 211bn Tenge ($1,720m) for the full year of 2007, increased by 17.4bn Tenge ($142m), or 9% mainly due to release of a provision for an environmental fine of 11.4bn Tenge ($93m) in the first half of 2006. Excluding the environmental fine reversal, operating expenses were 3% or 6.0bn Tenge higher than in 2006. The increase was mainly caused by an increase in transportation, materials, depreciation, depletion and amortization, fines and penalties, stock option expenses, partly offset by a reduction in the consulting services, social infrastructure expenses, other taxes and other expenses.
Operating cash flow was 173bn Tenge ($1,411m) for the full year of 2007, approximately 42% higher than for the full year of 2006. Cash outflow used in investing activities related to acquisitions of stakes in Kazgermunai and CCEL in 2007 was 137bn Tenge ($1,119 m).
Purchases of property, plant and equipment (capital expenditures, not including purchases of intangible assets, as per Cash Flow Statement) for the full year of 2007 were 40.1bn Tenge ($327m) which is 19% lower than the full year of 2006.
Dividends paid to the Company’s shareholders in 2007 were 35.7bn Tenge ($291m).
Impact of acquisition of a 50% stake in Kazgermunai
On 24 April 2007 KMG EP finalised the acquisition of a 50% stake in Kazgermunai. For the year ended 31 December 2007 following the acquisition of a 50% interest in Kazgermunai, the share of KMG EP of 27.6 bn Tenge in the net income of this joint venture was adjusted for non-cash fair value differences and recorded as 17.9bn Tenge ($146m).
During the full year of 2007, Kazgermunai produced 3,055 thousand tonnes of oil (63.78 kbopd), 5.9% up compared to the full year of 2006. For the 251 days between the acquisition date and 31 December 2007 the Company’s share in Kazgermunai crude oil production was 1,062 thousand tonnes (32.23kbopd).
KMG EP received $300 million and a further $75 million in dividends from Kazgermunai in November 2007 and March 2008 respectively.
Impact of acquisition of a 50% stake in CCEL
On 12 December 2007 the Company completed the acquisition and received from State Alliance Holdings Limited (a holding company ultimately belonging to CITIC Group, a company listed on the Hong Kong stock exchange) a 50% participation interest in a holding company, CCEL, whose investments are involved in oil and natural gas production in western Kazakhstan, in particular from Karazhanbas field.
The Company has recognized the amount of US$150 million (18,478 million Tenge) as a receivable from jointly controlled entity.
During the full year of 2007, CCEL produced 1,942 thousand tonnes of oil (35.54kbopd). A 50% share in CCEL crude oil production from the acquisition date to the end of the year 2007 was 48 thousand tonnes (15.88kbopd).
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