Kazmunaigaz Exploration Regulatory News (KMG)

21 Jun 2007 08:00

JSC KazMunaiGas Exploration Prod21 June 2007 JSC KazMunaiGas Exploration Production announces the first quarter 2007 financial results Astana, 21 June, 2007. JSC KazMunaiGas Exploration Production ("KMG EP" or the "Company") has released its unaudited condensed consolidated interim financialinformation for the three months ended 31 March 2007 reviewed by Ernst & Young. Highlights: • 0.6% growth of oil production• Stable net income from continuing operations• Strong 2006 results of JV Kazgermunai LLP ("Kazgermunai") In the first quarter of 2007, the Company produced 2,289 thousand tonnes ofcrude oil (187.18 kbopd), 13 thousand tonnes more than in the same period of2006. The Company supplied 2,390 thousand tonnes of crude oil (195.45 kbopd) tothe customers including 1,935 thousand tonnes (158.24 kbopd) supplied to exportmarkets, 17.8% more than in the first quarter of 2006. Profit after tax (net income) from continuing operations in the first quarter of2007 was 23.8 bn Tenge, 3.8% lower than in the first quarter of 2006. Thedecrease in net income was mainly due to a one-off reversal of an environmentalfine of 11.4 bn Tenge in the first quarter of 2006 and an increase of foreignexchange losses by 2.3 bn Tenge partly offset by the combination of the 5.9 bnTenge increase in finance income and the 7.5 bn Tenge decrease of income taxexpense. Earnings per share in the first quarter of 2007 were 322.19 Tenge(approximately US$ 0.43 per GDR). Commenting on the financial results for the first quarter of 2007, AskarBalzhanov, the CEO of the Company, said: "The first three months of the yearhave been pleasing as we have managed to maintain existing crude oil productionlevels and kept tight control over costs." KMG EP's revenues for the first quarter 2007 decreased by 2.3% to 98.2 bn Tenge.This was primarily due to a 9.0% decrease in the average realised price from44,328 Tenge per tonne (US$46.76 per bbl) to 40,344 Tenge per tonne (US$44.68per bbl). The average realised price went down primarily because of lower exportprices. This reduction in realised price was partly offset by an increase insales volume of 7.0%. In the first quarter of 2007 exports accounted for 81% ofthe sales in volume terms (74% in the first quarter of 2006). In US dollar termsrevenues increased by 2.6% year on year. Operating expenses were 49.2 bn Tenge in the first quarter 2007, 1.4 bn Tengelower than in the first quarter of 2006, net of the reversal of theenvironmental fine in 2006. Profit from operations was 49.0 bn Tenge in thefirst quarter of 2007, at approximately the same level as in the first quarterof 2006, adjusted for the environmental fine reversal. Operating cash flow was 24.3 bn Tenge for the first three months of 2007,approximately 33.2% lower than for the first three months of 2006 mainlyreflecting time-lag between crude oil shipments and corresponding payments aswell as a decline in export oil prices. In the first quarter of 2007 theaccounts receivable went up as export shipments were accelerating while in thefirst quarter of 2006 the accounts receivable went down as the Company receivedseveral large payments for crude shipments made in late 2005. Purchases of property, plant and equipment (capital expenditures, not includingpurchases of intangible assets, as per Cash Flow Statement) for the firstquarter of 2007 were 9.0 bn Tenge or 26.0% higher than in the first quarter of2006. The increase reflects timing of the capital expenditures this yearcompared to 2006. KMG EP's full year capital expenditures in 2007, calculated ona cash basis, are expected to decrease to 39.8 bn Tenge compared to 2006 actualcapital expenditures of 49.3 bn Tenge. Cash, cash equivalents and financial assets at the end of the first quarter 2007amounted to 407.6 bn Tenge compared to 391.8 bn Tenge at the end of 2006.Borrowings were 54.5 bn Tenge at the end of the first quarter of 2007 comparedto 59.7 bn Tenge at the end of 2006. The full condensed consolidated interim financial information for the threemonths ended 31 March, 2007 (unaudited) and the notes thereto are available atthe Company's website (www.kmgep.kz ) Kazgermunai's financial results for 2006 KMG EP has also released today financial statements of its 50% joint ventureKazgermunai for the year ended December 31, 2006 presented in US dollars. In 2006, Kazgermunai produced 2,909 thousand tonnes of crude oil (60.72 kbopd)that is 1,046 thousand tonnes more than in 2005. Kazgermunai exported 2,333thousand tonnes of crude oil (48.72 kbopd) to customers, 54.4% more than in2005. Crude oil delivered for refining in 2006 was 320 thousand tonnes (6.68kbopd) 104.4% up compared to 2005. Kazgermunai's profit after tax (net income) for 2006 was US$ 468.4 mn, 124.4%higher than for 2005. Operating cash flow was US$ 459.5 mn for 2006,approximately 126.7% higher than for 2005. Purchases of property, plant andequipment for 2006, calculated on a cash basis, were US$ 23.7 mn down by US$21.2 mn compared to 2005. Kazgermunai paid US$ 228.5 mn of dividends in 2006. In April 2007, KMG EP finalised the acquisition of a 50% stake in Kazgermunaifor 118.3 bn Tenge (approximately US$ 969 mn) from JSC National CompanyKazMunaiGas. The purchase was financed from the existing financial resources ofKMG EP and will be accounted for as an equity investment. The full financial statements of Kazgermunai for the year ended 31 December 2006have been prepared in accordance with International Financial ReportingStandards and have been audited by PricewaterhouseCoopers. The full financialstatements of Kazgermunai and notes thereto are available on the Company'swebsite (www.kmgep.kz ). Divesting of non-core or non-essential services subsidiaries As part of the Company's Asset Optimisation Programme, in the second quarter of2007 KMG EP has successfully conducted open tenders for sale of its followingservices subsidiaries: • JSC Sanatoriy Atyrau - health services - Sale price: 675 mn Tenge • Embamunaiavtomatika LLP - technical maintenance of measuring instruments and IT - Sale price: 375 mn Tenge • Avtoremotnoe upravlenie LLP - automobile transport repairs - Sale price: 46.5 mn Tenge • Burgylau LLP - production, exploration and sidetrack drilling, workover operationsservices - Sale price: 9,600 mn Tenge The Company expects to finalise the sale of Burgylau in the third quarter of2007. Management believes that the exposure of Burgylau to the competitiveenvironment will ultimately result in improved quality and compressed timing ofits services as well as more flexibility for the Company in terms of sourcingoilfield services in requires. The terms of the sale and purchase agreementensure availability of the services provided by Burgylau to the Company andprotect the Company against arbitrary changes in the pricing for such servicesfor the next three years. Return of JSC Kazakhstan Petrochemical Industries shares In December 2005 the Company sold a 35% interest in JSC Kazakhstan PetrochemicalIndustries ("KPI") for 3.2 bn Tenge out of its 50% stake in this petrochemicaloperation. The buyer , LLP SAT & Company, failed to pay for the interest and asa result the interest was returned to KMG EP together with an additional cashsum as a fine representing 0.1% of the purchase price. KMG EP is now restored toa 50% stake in KPI. Currently the management is reviewing the possible waysforward in the light of this event. *** Appendix 1, Key operating and financial indicators of KMG EP for the firstquarter of 2007 ((1)) Summary Operating Data Three months ended March 31, thousand tonnes 2007 2006Crude oil production 2,289 2,276Crude oil exports 1,935 1,643Crude oil domestic 455 590 Summary of Condensed Consolidated Balance Sheets Tenge Millions March 31, December 31, 2007 2006 unaudited auditedASSETSNon-current assets 274,225 376,824Current assets 473,711 358,114Total assets 747,936 734,937EQUITY Equity holders of the Company 550,268 525,752Minority interest 6 6Total equity 550,274 525,758LIABILITIESNon-current liabilities 97,852 100,844Current liabilities 99,810 108,336Total liabilities 197,663 209,180TOTAL EQUITY AND LIABILITIES 747,936 734,937 Summary of Condensed Consolidated Statements of Income Three months ended March 31,Tenge Millions 2007 2006 unaudited unaudited Revenue 98,184 100,509Operating expenses (49,169) (39,140)Profit from operations 49,015 61,369Finance (expense) income 1,637 (1,943)Share of result of associates (95) (374)Profit before tax and minority interest 50,558 59,051Income tax expense (26,710) (34,259)Profit for the period from continuing operations 23,847 24,792 Attributable to:Equity holders of the Company 23,847 24,793Minority interest - (1) Summary of Consolidated Statements of Cash Flows Three months ended March 31,Tenge Millions 2007 2006 unaudited unauditedNet cash generated from operating activities 24,329 36,439 Cash flows from investing activitiesPurchases of property, plant and equipment (PPE) (9,048) (7,183)Sale of held-to-maturity and 105,619 5,871available-for-sale financial assets, netDisposal of subsidiaries, net of cash disposed - 3,356Interest received and other 7,117 (3,036)Net cash provided from (used in) investing activities 103,688 (992)Net cash used in financing activities (1,108) (958) The following tables show the Company's realised sales prices adjusted for oiland oil products transportation and other expenses for the three months endedMarch 31, 2007 and 2006. Netback analysis*, for the first quarter of 2007 CPC UAS Domestic TotalSales volume, thousand tonnes 550 1,385 455 2,390Estimated market quote**, US$/bbl 58.34 54.11 n/a n/aAverage realized price, US$/bbl 53.68 49.63 18.69 44.68Adjusted realized price, net of 47.50 43.53 17.90 39.57transportation and selling expenses, US$/bbl Netback analysis*, for the first quarter of 2006 CPC UAS Domestic TotalSales volume, thousand tonnes 350 1,293 590 2,233Estimated market quote**, US$/bbl 61.68 57.81 n/a n/aAverage realized price, US$/bbl 60.62 56.60 16.97 46.76Adjusted realized price, net of 54.84 50.70 15.30 41.99transportation and selling expenses, US$/bbl * Excluding gas products, other sales and services ** CPC Blend for shipments via Caspian Pipeline Consortium pipeline (CPC) andUrals RCMB for shipments via Uzen-Atyrau-Samara pipeline (UAS). Reference information Three months ended March 31, 2007 2006Average exchange rate US$/KZT* 124.90 131.13Exchange rate US$/KZT as of 31 December 2006* 127.00Exchange rate US$/KZT as of 31 March 2006* 123.84 *Source: The National Bank of Kazakhstan, the average exchange rates for theperiods are calculated on the basis of the daily exchange rates Barrels to tonnes conversion ratio for KMG EP crude oil 7.36Barrels to tonnes conversion ratio for Kazgermunai crude oil 7.62 Appendix 2, Key Operating and Financial Indicators of Kazgermunai for 2006 Summary Operating Data For the year ended December 31, thousand tonnes 2006 2005Crude oil production 2,909 1,862Crude oil exports 2,333 1,512Crude oil domestic - 71Crude oil delivered for refining 320 157 Summary of Balance Sheets as of 31 December 2006 US$ Thousands December 31, December 31, 2006 2005 audited auditedASSETSNon-current assets 248,873 258,557Current assets 576,472 345,022Total assets 825,345 603,579EQUITYTotal equity 727,437 487,577LIABILITIESNon-current liabilities 60,212 58,505Current liabilities 37,696 57,497Total liabilities 97,908 116,002TOTAL EQUITY AND LIABILITIES 825,345 603,579 Summary of Statements of Income for the year ended 31 December 2006 For the year ended December 31,US$ Thousands 2006 2005 audited audited Revenue 1,038,304 529,280Operating expenses (261,601) (162,713)Profit from operations 776,703 366,567Finance (expense) income 5,231 (8,014)Profit before tax 781,934 358,553Income tax expense (313,574) (149,863)Profit for the year 468,360 208,690 Summary of Statements of Cash Flows for the year ended 31 December 2006 For the year ended December 31,US$ Thousands 2006 2005 audited auditedNet cash generated from operating activities 459,509 202,714Cash flows from investing activitiesPurchases of property, plant and equipment (PPE) (23,707) (44,928)Other (271) (1,486)Net cash provided used in investing activities (23,978) (46,414) Cash flows from financing activitiesDividends paid to Company's shareholders (228,500) -Other (11,500) (31,200)Net cash used in financing activities (240,000) (31,200) Notes to Editors KMG EP was the 3rd largest Kazakh oil and gas producing company with over 9.5mmt(192 kbopd) of crude production in 2006 and 203.2 mmt (1.5 bn bbl) of proved andprobable reserves at the end of 2006. The recent acquisition of 50% ofKazgermunai made KMG EP the 2nd largest Kazakh oil and gas producer. TheCompany's shares are listed on Kazakhstan Stock Exchange and the GDRs are listedon London Stock Exchange. The Company raised approximately US$2 billion in itsIPO in September of 2006. For further details please contact us at: KMG EP, Public Relations (+7 317 2 977 908, +7 3172 977 924)Lyazzat Kokkozova E-mail: pr@kmgep.kz KMG EP, Investor Relations (+7 3172 975433)Alexander GladyshevE-mail: ir@kmgep.kz WMC Communications Ltd (+44 207 930 9030)Alex Glover: (+44 207 930 9030)E-mail: alex.glover@wmccommunications.comElena Dobson: (+44 (0)7932524760)E-mail: Elena.dobson@wmccommunications.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 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 results of operations, financial condition, liquidity, prospects,growth, potential acquisitions, strategies and as to the industries in which theCompany operates. By their nature, forward-looking statements involve risk anduncertainty because they relate to future events and circumstances that may ormay not occur. Forward-looking statements are not guarantees of futureperformance and the actual results of the Company's operations, financialcondition and liquidity and the development of the country and the industries inwhich the Company operates may differ materially from those described in, orsuggested by, the forward-looking statements contained in this document. TheCompany does not intend, and does not assume any obligation, to update or reviseany forward-looking statements or industry information set out in this document,whether as a result of new information, future events or otherwise. The Companydoes not make any representation, warranty or prediction that the resultsanticipated by such forward-looking statements will be achieved. -------------------------- (1) Rounding adjustments have been made in calculating some of the financialinformation included in the Appendix 1 and 2. As a result, figures shown astotals in some tables may not be exact arithmetic aggregations of the figuresthat precede them. This information is provided by RNS The company news service from the London Stock Exchange