14 Aug 2012 08:00
PRESS - RELEASE
JSC KazMunaiGas Exploration Production
1H 2012 financial results
Astana,14 August 2012. JSC KazMunaiGas Exploration Production ("KMG EP" or "the Company") announces its condensed consolidated interim financial statements for the six months ended June 30, 2012.
·; Revenues amounted to 399bn Tenge (US$2,690m), comparable to the revenues in the same period of 2011 on higher domestic prices fully offset by reduced export volumes.
·; Net profit amounted to 121bn Tenge (US$820m) and earnings per share - 1,740 Tenge (US$2.0 per GDR), an increase of 6%and 10%, respectively, compared to the same period of 2011.
Production Highlights
In the first six months of 2012 KMG EP produced 6,057 thousand tonnes of crude oil (248 kbopd), including the Company's stakes in Kazgermunai (KGM), CCEL and PetroKazakhstan Inc. (PKI) which is 4% less than in the same period of 2011.
JSC Uzenmunaigas ("UMG") produced 2,467 thousand tonnes (100 kbopd), which is 266 thousand tonnes less than in the same period of 2011. JSC Embamunaigas ("EMG") produced 1,376 thousand tonnes (56 kbopd), which is 7 thousand tonnes less than in the same period of 2011. In total this represents 7% less than in the same period of 2011.
The major reasons for low production levels at UMG were adverse weather conditions in first quarter, effect of wells idle time accumulated during labor action in 2011, as well as deteriorating infrastructure and equipment.
Taking into account recent production trend and the results of the first half of the year, the Company updates its annual production plan for UMG, initially set at 5,800 thousand tonnes. According to preliminary estimates it is expected that UMG will produce about 5,000 thousand tonnes in 2012 (101 kbopd). The Company expects that EMG will achieve initial plan of 2,815 thousand tonnes (57 kbopd). Thus, it is expected that the total volume of the oil produced at UMG and EMG in 2012 will be about the same as in 2011. The modernisation program, which the Company has started in 2012, is intended to lay a foundation for sustainable and efficient production in the future.
The Company's share in the productions from KGM, CCEL and PKI for the six months of 2012 amounted to 2,215 thousand tonnes of crude oil (92 kbopd) or 1% more than in the same period of 2011. The 2012 Production plans of KGM, CCEL and PKI are not being revised.
Crude oil sales
In the first six months of 2012 the Company's export and domestic sales from UMG and EMG were 3,011 thousand tonnes (122 kbopd) and 960 thousand tonnes (39 kbopd) respectively. Thus, total volume of sales from UMG and EMG amounted to 3,970 thousand tonnes (161 kbobd), 5% less than in the same period of 2011.
The Company's shares in sales of crude oil from KGM, CCEL and PKI were 2,237 thousand tonnes (93 kbopd), including 1,530 thousand tonnes (64 kbopd) supplied to export. PKI sales volumes include sales of oil products as well.
Net Profit for the Period
Profit after tax (net income) in the first six months of 2012 was 121bn Tenge (US$820m), representing a 6% increase compared to the same period of 2011, mainly due to higher average sales prices for export and domestic supply and lower SG&A expenses, as well as foreign exchange gain partly offset by a decline in export volumes.
Revenues
The Company's revenues in the first six months of 2012 remained at similar levels to those of the same period of 2011, and amounted to 399bn Tenge (US$2,690m). The effect of the 33% increase in domestic selling prices was partly offset by reduced export volumes. Domestic supply prices were higher, according to the agreement with Government on increase of oil prices in 2012 as partial compensation for the increased costs at Uzen.
Taxes other than on Income
Taxes, other than on income, in the first six months of 2012 were 144bn Tenge (US$974m), which is 11% lower compared to the same period of 2011. The decrease is due to the reduced production and export volumes.
Production Expenses
Production expenses in the first six months of 2012 were 69bn Tenge (US$467m), which is 10% higher compared to the same period of 2011. A significant part of the production costs increase is due to the annual salary indexation applied from January 1, 2012 and the decrease in crude oil balance, which were partly offset by a reduction in repairs and maintenance expenses due to reduction of the number of repaired wells.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the first six months of 2012 were 47bn Tenge (US$318m), which is 21% lower compared to the same period of 2011. The decrease is mainly due to lower expenses for penalties and fines, lower management fees to National Company Kazmunaigas as well as lower transportation expenses as a result of lower transportation volumes, partially offset by an increase in employee costs.
Fines and penalties
On July 12, 2012 the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan completed the 2006-2008 comprehensive tax audit of the Company. As a result of the tax audit, which was commenced in October 2011, the tax authorities provided a tax assessment to the Company of 16.9bn Tenge, including 5.8bn Tenge of principal, 7.2bn Tenge of administrative fines and 4.0bn Tenge of late payment interest. The Company has begun the process of preparing an appeal to the Court.
Cash Flows from Operating Activities
Operating cash flow in the first six months of 2012 was 91bn Tenge (US$612m), which is 5% higher compared to the same period of 2011, this is mainly due to higher average sales prices for export and domestic supply and lower selling, general and administrative expenses, partly offset by a decline in export volumes.
Capex
Purchases of property, plant and equipment and intangible assets (as per Cash Flow Statement) in the first six months of 2012 were 46bn Tenge (US$310m), which is 1% lower compared to the same period of 2011.
Cash and Debt
Cash and cash equivalents as at June 30, 2012 amounted to 114bn Tenge (US$0,8bn) compared to 207bn Tenge (US$1,4bn)as at December 31, 2011.
Other financial assets (current and non-current) at June 30, 2012 were 692bn Tenge (US$4.6bn) compared to 511bn Tenge (US$3.4bn) as at December 31, 2011. Other financial assets include the NC KMG Bond, deposits and additional financial instruments. As at June 30, 2012 the outstanding amount of the Bond was 189bn Tenge (US$1.3bn).
77% of cash and financial assets (including the Bond) as at June 30, 2012 were denominated in foreign currencies and 23% were denominated in Tenge. Financial income accrued on cash and financial assets (including the Bond) in the first six months of 2012 was 16.9bn Tenge (US$114m).
Borrowings as at June 30, 2012 were 90bn Tenge (US$600m), representing a 2% increase compared to December 31, 2011. Borrowings include 82bn Tenge (US$549m) of non-recourse debt of KMG PKI Finance B.V. related to the acquisition of the 33% interest in PKI, which the Company fully repaid on July 5, 2012.
The net cash position[1] as at 30 June 2012 amounted to 716bn Tenge (US$4.8bn) compared to 629bn Tenge (US$4.2bn) as at 31 December 2011.
Income from associates and joint ventures
In the first six months of 2012, KMG EP's share in associates and joint ventures was 41bn Tenge (US$276m), 16% lower compared to the same period of 2011. This was mainly driven by decrease of export volumes and increase of tax payments, which was partially compensated by higher oil prices.
Kazgermunai
In the first six months of 2012 KMG EP recognised 21bn Tenge (US$140m) of income from its share inKGM. This amount represents 50% of KGM's net profit of 24bn Tenge (US$163m) and a 0.4bn Tenge (US$3m) deferred income tax benefit net of 3.8 bn Tenge (US$26m) from the effect of purchase price premium amortization.
KGM's net income decreased by 11% in the reported period compared to the same period of 2011 mainly due to decrease in the export volume and the growth of tax payments.
PetroKazakhstan Inc.
In the first six months of 2012 KMG EP recognised 21bn Tenge (US$140m) of income from its share inPKI. This amount represents 33% of PKI's net profit of 27bn Tenge (US$180m) net of 6bn Tenge (US$41m) from the effect of purchase price premium amortization.
PKI's net income increased by 13% in the reported period compared to the same period of 2011 mainly due to the decrease in the export volume.
CCEL
As of June 30, 2012 the Company has recognised 21bn Tenge (US$141m) as a receivable from CCEL, a jointly controlled entity with CITIC Group. The Company has accrued 1.4bn Tenge (US$10m) of interest income in the first six months of 2012 related to the US$26.87m annual priority return from CCEL.
***
The condensed consolidated interim financial statements for the six months ended June 30, 2012, the notes thereto, and the operating and financial review for the period is available on the Company's website (www.kmgep.kz).
Appendix[2]
Consolidated Interim Statement of Comprehensive Income (unaudited)
Tenge million
Three months ended June 30, | Six months ended June 30, | ||||
2012 | 2011 | 2012 | 2011 | ||
Revenue | 191,690 | 208,534 | 398,543 | 400,058 | |
Share of results of associates and joint ventures | 15,158 | 26,889 | 40,905 | 48,579 | |
Finance income | 11,344 | 7,711 | 16,906 | 15,375 | |
Total revenue and other income | 218,192 | 243,134 | 456,354 | 464,012 | |
Production expenses | (38,168) | (33,036) | (69,120) | (62,698) | |
Selling, general and administrative expenses | (26,952) | (33,880) | (47,091) | (59,264) | |
Exploration expenses | (3,028) | (629) | (4,326) | (678) | |
Depreciation, depletion and amortization | (13,022) | (10,811) | (25,592) | (21,584) | |
Taxes other than on income | (69,091) | (89,335) | (144,272) | (161,871) | |
Loss on disposal of property, plant and equipment | (248) | (1,513) | (400) | (2,128) | |
Finance costs | (1,470) | (2,079) | (2,973) | (3,789) | |
Foreign exchange gain / (loss) | 6,774 | 2,323 | 4,256 | (4,736) | |
Profit before tax | 72,987 | 74,174 | 166,836 | 147,264 | |
Income tax expense | (26,740) | (18,864) | (45,371) | (32,926) | |
Profit for the period | 46,247 | 55,310 | 121,465 | 114,338 | |
Exchange difference on translating foreign operations | 2,089 | 800 | 1,504 | (811) | |
Other comprehensive gain / (loss) for the period, net of tax | 2,089 | 800 | 1,504 | (811) | |
Total comprehensive income for the period, net of tax | 48,336 | 56,110 | 122,969 | 113,527 | |
EARNINGS PER SHARE - Tenge thousands | |||||
Basic and diluted | 0.67 | 0.77 | 1.74 | 1.58 | |
Consolidated Interim Statement of Cash Flows (unaudited)
Tenge million
Six months ended June 30, | |||
2012 | 2011 | ||
Cash flows from operating activities | |||
Profit before tax | 166,836 | 147,264 | |
Adjustments to add / (deduct) non-cash items | |||
Depreciation, depletion and amortisation | 25,592 | 21,584 | |
Share of result of associates and joint ventures | (40,905) | (48,579) | |
Loss on disposal of property, plant and equipment (PPE) | 400 | 2,128 | |
Impairment of PPE and intangible assets | 569 | 695 | |
Dry well expense on exploration and evaluation assets | 3,281 | − | |
Recognition of share-based payments | 177 | 205 | |
Unrealised foreign exchange (gain) / loss on non-operating activities | (4,129) | 2,667 | |
Other non-cash income and expense | 1,471 | 2,616 | |
Add finance costs | 2,973 | 3,789 | |
Deduct finance income relating to investing activity | (16,906) | (15,375) | |
Working capital adjustments | |||
Change in other assets | 346 | 6,480 | |
Change in inventories | 6,180 | 3,043 | |
Change in taxes prepaid and VAT recoverable | (269) | 10,804 | |
Change in prepaid expenses | 645 | 12,454 | |
Change in trade and other receivables | (27,600) | (36,384) | |
Change in trade and other payables | 4,492 | (12,652) | |
Change in mineral extraction and rent tax payable | 5,278 | 22,644 | |
Change in provisions | 6,092 | 1,471 | |
Income tax paid | (43,799) | (38,491) | |
Net cash generated from operating activities | 90,724 | 86,363 | |
Cash flows from investing activities | |||
Purchases of PPE | (42,169) | (45,464) | |
Proceeds from sale of PPE | 797 | 395 | |
Purchases of intangible assets | (3,813) | (1,093) | |
Acquisition of share in a joint venture | − | (23,907) | |
Loans provided to a joint venture | (637) | (637) | |
Dividends received from joint ventures and associates | 43,635 | 29,028 | |
Interest received from investment in debt instruments of NC KMG | 6,586 | 6,462 | |
Purchase of financial assets held-to-maturity | (174,875) | (21,518) | |
Proceeds from sale of other financial assets | 4,860 | − | |
Deferred payment for acquisition of subsidiary | − | (416) | |
Interest received | 1,522 | 2,734 | |
Net cash used in investing activities | (164,094) | (54,416) | |
Cash flows from financing activities | |||
Share buy back | (17,945) | (10,199) | |
Repayment of borrowings | (831) | (541) | |
Dividends paid to Company's shareholders | (659) | (21,863) | |
Net cash used in financing activities | (19,435) | (32,603) | |
Net change in cash and cash equivalents | (92,805) | (656) | |
Cash and cash equivalents at beginning of the year | 206,512 | 98,520 | |
Exchange gains on cash and cash equivalents | 110 | 107 | |
Cash and cash equivalents at the end of the period | 113,817 | 97,971 | |
Consolidated Interim Statement of Financial Position
Tenge million
June 30, 2012 | December 31, 2011 | ||
Unaudited | Audited | ||
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 359,738 | 338,860 | |
Intangible assets | 22,374 | 26,638 | |
Investments in joint ventures | 107,500 | 116,526 | |
Investments in associates | 140,782 | 133,228 | |
Receivable from a jointly controlled entity | 18,490 | 18,138 | |
Loan receivable from a joint venture | 9,517 | 8,494 | |
Other financial assets | 1,034 | 188,803 | |
Deferred tax asset | 13,963 | 9,450 | |
Other assets | 17,743 | 19,593 | |
Total non-current assets | 691,141 | 859,730 | |
Current assets | |||
Inventories | 16,638 | 22,651 | |
Income taxes prepaid | 6,876 | 9,971 | |
Taxes prepaid and VAT recoverable | 23,007 | 22,738 | |
Prepaid expenses | 11,410 | 12,054 | |
Trade and other receivables | 112,093 | 84,126 | |
Receivable from a jointly controlled entity | 2,574 | 1,361 | |
Other financial assets | 690,657 | 321,890 | |
Cash and cash equivalents | 113,817 | 206,512 | |
Total current assets | 977,072 | 681,303 | |
Total assets | 1,668,213 | 1,541,033 | |
EQUITY | |||
Share capital | 181,133 | 198,452 | |
Other capital reserves | 2,301 | 2,124 | |
Retained earnings | 1,114,977 | 1,083,749 | |
Other components of equity | 15,858 | 14,354 | |
Total equity | 1,314,269 | 1,298,679 | |
LIABILITIES | |||
Non-current liabilities | |||
Borrowings | 5,154 | 33,034 | |
Deferred tax liability | 1,392 | 2,049 | |
Provisions | 39,381 | 37,846 | |
Total non-current liabilities | 45,927 | 72,929 | |
Current liabilities | |||
Borrowings | 84,486 | 54,931 | |
Mineral extraction tax and rent tax payable | 56,187 | 50,908 | |
Trade and other payables | 143,220 | 48,680 | |
Provisions | 24,124 | 14,906 | |
Total current liabilities | 308,017 | 169,425 | |
Total liabilities | 353,944 | 242,354 | |
Total liabilities and equity | 1,668,213 | 1,541,033 |
The following tables show the Company's realised sales prices adjusted for oil and oil products transportation and other expenses for the first six months of 2012 and 2011.
1H 2012, (US$/bbl) | UAS | CPC | Domestic |
Benchmark end-market quote[3] | 113.64 | 113.64 | - |
Sales price | 109.01 | 110.40 | 34.79 |
Quality bank | - | (7.59) | - |
Premium of bbl difference | 0.24 | 8.89 | - |
Realised price[4] | 109.25 | 111.70 | 34.79 |
Rent tax | (24.39) | (24.42) | - |
Export customs duty | (5.52) | (5.08) | - |
Transportation | (7.64) | (7.04) | (1.11) |
Sales commissions | (0.04) | (0.04) | - |
Adjusted realised price | 71.66 | 75.12 | 33.67 |
1H 2011, (US$/bbl) | UAS | CPC | Domestic |
Benchmark end-market quote4 | 111.09 | 111.09 | - |
Sales price | 105.34 | 109.50 | 26.48 |
Quality bank | - | (9.05) | - |
Premium of bbl difference | (0.10) | 9.18 | - |
Realised price5 | 105.24 | 109.63 | 26.48 |
Rental tax | 24.47 | 24.43 | - |
Export customs duty | 9.34 | 9.34 | - |
Transportation | 7.66 | 7.62 | 1.45 |
Sales commissions | 0.07 | 0.07 | - |
Adjusted realised price | 63.69 | 68.17 | 25.03 |
Reference information | 1H 2012 | 1H 2011 |
Average exchange US$/KZT rate | 148.16 | 146.00 |
End of period US$/KZT rate | 149.42 | 146.25 |
Coefficient barrels to tonnes for KMG EP crude | 7.36 | |
Coefficient barrels to tonnes for Kazgermunai crude | 7.70 | |
Coefficient barrels to tonnes for CCEL crude | 6.68 | |
Coefficient barrels to tonnes for PKI crude | 7.75 | |
Notes to Editors
KMG EP is among the top three Kazakh oil and gas producers. The overall production in 2011 was 12.3mt (an average of 250 kbopd) of crude oil, including the Company's share in Kazgermunai, CCEL and PKI. The total volume of proved and probable reserves, as at the end of 2011 was 226mt (1.7bn bbl), including shares in the associates of about 2.1 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. The International rating agency Standard & Poor's (S&P) confirmed KMG EP's "BBB-" corporate credit rating in December 2011.
For further details please contact us at:
KMG EP Public Relations (+7 7172 97 7887)
Bakdaulet Tolegen
E-mail: pr@kmgep.kz
KMG EP Investor Relations (+7 7172 97 5433)
Asel Kaliyeva
E-mail: ir@kmgep.kz
Pelham Bell Pottinger (+44207861 31 47)
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.
[1] Cash, cash equivalents and other financial assets (including the Bond) less borrowings.
[2] Rounding adjustments have been made in calculating some of the financial information included in the Appendix. As a result, figures shown as total in some tables may not be exact arithmetic aggregations of the figures that precede them.
[3] The Brent (DTD) quoted price is used as benchmark
[4] Average realized price converted at 7.23 barrels per tonne of crude oil