120 Years Of Kazakhstani Oil
KazMunayGas Operating and Financial Results for the First Half of 2019
Joint-stock National Company KazMunayGas, Kazakhstan's national vertically integrated oil and gas company, announces its operating and financial results for the first half of 2019 according to International Financial Reporting Standards (IFRS).
Operating Highlights for the first half of 2019[1]:
- Oil and gas condensate production was down 0.5% year-on-year to 11,704 thous. tonnes (484 thous. barrels of oil per day[2]);
- Natural and associated gas production was up 0.9% year-on-year to 4,160 mln m³;
- Oil transportation increased by 5.0% year-on-year to 38,949 thous. tonnes;
- Gas transportation was down 8.7% year-on-year to 50.1 bln m³;
- Refinery volume was up 1.7% year-on-year to 9,998 thous. tonnes. Volume includes refinery volume in Kazakhstan of 6,670 thous. tonnes and KMG International (“KMGI”) of 3,328 thous. tonnes in Romania. Total oil products production was up 1.6% year-on-year to 9,360 thous. tonnes;
- Sales volume of crude oil produced by KMG was up 0.5% year-on-year to 11,641 thous. tonnes.
Financial Highlights for the first half of 2019[3]:
- Revenue was up 1.4% year-on-year to 3,403 bln tenge (USD 8,971 mln);
- Net profit was up 73.0% year-on-year to 622 bln tenge (USD 1,641 mln);
- Capital expenditure was down 5.8% year-on-year to 167 bln tenge (USD 440 mln);
- EBITDA[4] was up 20.5% year-on-year to 1,095 bln tenge (USD 2,888 mln);
- Net debt was up 15.0% and amounted to 2,491 bln tenge (USD 6,547 mln) compared to 31 December 2018;
- FCF adjusted[5]soared by 77.7% and amounted to 128 bln tenge (USD 339 mln).
Key corporate events:
- On 22 February 2019, KazMunayGas Exploration Production JSC (KMG EP) completed its preferred shares buyback programme. KMG EP repurchased preferred shares in the amount of 15.9 bln tenge, representing 65.0% of the outstanding float. As of 14 May 2019, preferred shares of KMG EP were delisted from the KASE official list;
- In February 2019, in accordance with its strategy and government plan, KMG completed the sale of its KazMunayGas-branded fueling station network for 60,512 mln tenge, thus exiting retail petroleum stations business in Kazakhstan;
- In March 2019, international rating agency Fitch confirmed its rating at the level “BBB-/Forecast stable”, while increasing the individual rating (stand-alone credit profile) from b to bb-;
- On 29 March 2019, KMG obtained the consent of the holders of Eurobonds to be redeemed in 2022, 2023, 2027, 2047 (Eurobonds issued before 2018) for (1) alignment of the covenant package with the terms of the issue of Eurobonds of 2018 and (2) early repayment of Eurobonds in the amount of USD 30.1 mln due for repayment in 2044;
- On 29 April 2019, Mr. Luis Maria Viana Palha Da Silva was elected as Board Member – Independent director of KMG;
- On 20 May 2019, Mr. Anthony Espina was elected as Board Member of KMG representing core shareholder, the Samruk-Kazyna JSC;
- In accordance with a Presidential decree, KMG will fund the construction of new social facilities (a 7,000-seat stadium and congress hall) in Turkestan for a total amount of 21 bln tenge. Along with this, in August 2019, KMG financed the construction of 1,000-seat amphitheater worth 1.8 bln tenge in Turkestan.
Operating results for the first half of 2019
Hydrocarbon production
During the first half of 2019 KMG oil and gas condensate production decreased by 0.5% year-on-year to 11,704 thous. tonnes in line with KMG’s plan. Natural and associated gas production increased by 0.9% to 4,160 mln m³.
During the first half of 2019 Kashagan’s oil production was down by 7.6% year-on-year to 5,705 thous. tonnes or 250 kbopd. KMG’s share in Kashagan oil and gas production decreased by 7.6% and 6.3% to 472 thous. tonnes of oil and 278 mln m³ of gas, respectively. The decline in oil and gas production is due to the scheduled overhaul of onshore and offshore complexes and a production halt from 14 April to 19 May 2019.
KMG’s share in Karachaganak’s oil production decreased by 5.4% year-on-year to 535 thous. tonnes. Gas production decreased by 0.5% to 982 mln m³. The decrease in production is mainly attributable to high gas-condensate factor and increasing water-cut.
KMG’s share in Tengiz’s oil production increased by 1.5% year-on-year to 2,992 thous. tonnes. Tengiz gas production increased by 1.3% year-on-year with KMG’s share amounting to 1,636 mln m³ due to reliable operation of the SGI/KTL/SGP (Sour Gas Injection / Complex Technology Lines / Second Generation Plant) plants. On 1 August 2019, the KTL plant started its planned overhaul with a duration of 42 days.
KMG’s share in operating assets’ production slightly decreased by 0.5% and amounted to 7,707 thous. tonnes. The decrease is primarily driven by natural decline of oil production.
On 16 February 2019, the implementation of an investment project for the modernisation of a Jack Up Drilling Rig (JUDR) for 21.6 bln tenge or USD 57 mln was approved for the participation in drilling projects in the Azerbaijani sector of the Caspian Sea. KMG and the State Oil Company of Azerbaijan Republic (SOCAR) signed an agreement on trust management of the JUDR.
On 1 April 2019, KMG, the Ministry of Energy of the Republic of Kazakhstan, KMG and PJSC “LUKOIL” signed a contract for the exploration and production of hydrocarbons in the Zhenis site located in the Kazakhstani sector of the Caspian Sea. In accordance with KMG and LUKOIL estimations, extractable reserves (C3) of the project are 65.1 mln tonnes. The project operator is Zhenis Operating LLP (a 50:50 joint venture between KMG and LUKOIL).
On 7 June 2019, KMG and LUKOIL signed an agreement on the principles of the project “I-P-2”, the site of the same name located in the Kazakhstan sector of the Caspian Sea. In accordance with LUKOIL estimations extractable reserves (C1) of the project are 15.1 mln tonnes.
On 26 July 2019, the Ministry of Energy of the Republic of Kazakhstan, KMG and Eni S.p.A. (Eni) signed a contract for the exploration and production of hydrocarbons in field Abai located in the Kazakh sector of the Caspian Sea. In accordance with prospecting works in 2013 extractable reserves (C3) of the project are 180.3 mln tonnes. The project operator is Isatay Operating Company LLP (a 50:50 joint venture between KMG and Eni).