Kazakh oil group seeks acquisitions

June 18. Financial Times

By Ed Crooks in London

Kazakh oil group seeks acquisitionsKazMunaigas Exploration and Production, the listed arm of Kazakhstan’s national oil company, has $4bn of cash available for acquisitions and hopes to agree deals before the end of the year, its new chief executive has told the Financial Times.

Kenzhebek Ibrashev, who took over as chief executive of London-listed KMG E&P at the beginning of the month, said the company was “working on several opportunities” both inside and outside Kazakhstan.

He also said the recovery in the oil price since February had encouraged the company to raise its rate of investment, and rejected suggestions that Kazakhstan’s financial crisis was threatening its operations.

Most of the company’s $4.4bn net cash is deposited with Kazakh banks and this week Standard & Poor’s ratings agency, put the companies in the KMG group under review for a possible credit downgrade “because of our concerns about their exposure to Kazakhstan’s weak banking sector”.

However, Mr Ibrashev said: “So far we have not experienced any problems: there was just one issue when a bank was being rescued by the government. We are paying our employees on time and our contractors and our taxes to the government.”

He told investors at a conference in London yesterday that “as long as the stability of the financial system is preserved, we would be able to use our money sooner or later”, and said those concerns would not stop the company doing deals.

Floated in London in 2006, KMG E&P is majority owned by National Company KazMunaigas, Kazakhstan’s state-owned oil group, which has 62 per cent of the voting shares.

It is not involved in mega-projects such as Kashagan, the world’s most expensive oil development, but is Kazakhstan’s second-largest oil producer, operating mature onshore fields.

After a couple of deals in 2007, when it took 50 per cent stakes in two other Kazakh oil companies, its corporate activity slowed, but Mr Ibrashev suggested that was about to change.

He said: “We have been working on several opportunities, some for years now; we will continue to work, and I hope that this year we will be successful in some”.

The potential deals still needed further evaluation and regulatory approvals, he added, so it would be “a little bit premature to mention any names”.

The consolidation of Kazakhstan’s oil industry resumed in April, when NC KMG and PetroChina, the listed arm of China National Petroleum Company, agreed a $3.3bn deal to buy MangistauMunaigas, the country’s fifth-largest oil producer.

Zhaikmunai, a London-listed Kazakh oil company with a market capitalisation of $210m, is reported to be up for sale, and TNK-BP, BP’s Russian joint venture, has been cited as a possible buyer.

Mr Ibrashev said Zhaikmunai was “probably a good asset”, but KMG E&P had more work to do to see if it would be a suitable target.