KazMunaiGas EP profit up sharply on tenge devaluation

Aug 6. Reuters

KazMunaiGas EP profit up sharply on tenge devaluationKazMunaiGas Exploration Production (KMG EP) on Wednesday reported that first-half net profit increased 4.6 times year-on-year, mainly due to a significant pre-tax foreign exchange gain as a result of the tenge devaluation.

KMG EP is the London-listed arm of Kazakhstan’s state oil and gas group KazMunaiGas, which last month made an approach to buy the remaining shares in the company.

Bringing the cash-rich exploration arm back into the state-owned group is widely seen by analysts as a move towards the eventual public listing of the national company, which operates some of the largest oil and gas fields in the world.

KMG EP’s first-half profit came in at 210.3 billion tenge ($1.193 billion), on revenue of 464.4 billion tenge ($2.635 billion), which increased by 21 percent compared to the same year-ago period, the company said in a statement.

Kazakhstan, central Asia’s largest economy and the second-largest post-Soviet oil producer after Russia, devalued its tenge currency by 19 percent in February.

The central bank’s devaluation aimed to ease speculative pressure on the domestic foreign exchange market, support the country’s exporters of commodities such as oil and industrial metals, and stimulate economic growth.

KMG EP’s first-half capital expenditure totalled 58 billion tenge ($329 million), which is 12 percent higher than in the same period of 2013 mainly due to an increase in production drilling at OzenMunaiGas, KMG EP’s largest producing asset located in western Kazakhstan.

KMG EP said last month that its first-half oil output rose by 0.2 percent year-on-year to 6.106 million tonnes (250,000 barrels per day).

The company’s crude output rose by 2 percent to 12.4 million tonnes in 2013.

KMG EP said the average price of Brent crude in the first six months of 2014 was 1 percent higher than in the same period of 2013, up from $107.5 per barrel to $108.9 per barrel, KMG EP said.


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Fitch: No rating impact from NC KazMunayGaz’s proposed buyout

Aug. 5. Trend

Fitch Ratings says that JSC National Company KazMunayGaz’s (NC KMG) offer to its majority-owned subsidiary KazMunayGas Exploration Production JSC (KMG EP) for the latter’s ordinary shares that it does not already own will not have any impact on its ‘BBB’/Stable rating.

Last week, Kazakhstan wholly state-owned NC KMG stated that it approached independent non-executive Directors of KMG EP with the offer valued at USD18.5 per one KMG EP’s global depositary receipt, equal to one-sixth of KMG EP’s share. In total, NC KMG would be bidding for 36.8% of KMG EP’s outstanding shares.

Currently there is no certainty whether the independent non-executive Directors of KMG EP will proceed with the negotiations or whether the deal will be completed. We believe that the transaction, if it takes place at the indicated price, has no rating implications for NC KMG as it is, in our analysis, essentially cash-neutral for the company. We estimate the total value of the shares to be acquired at the announced price is USD2.8bn, while KMG EP at end-2013 had significant cash on hand of USD3.9bn and negligible debt of USD44m. In our analysis, we assume that KMG EP will not make any distributions to its shareholders before the proposed transaction takes place. We expect that if the transaction is completed it will allow NC KMG a more easy access to KMG EP’s cash, as well as a potential optimisation of certain overlapping operations between the parent and the subsidiary, in particular, in the exploration and production segment.

NC KMG’s rating is linked directly to Kazakhstan’s ‘BBB+’ (Stable) rating. NC KMG’s rating is one notch below the sovereign, reflecting the lack of an explicit state guarantee for NC KMG’s debt. Fitch views NC KMG’s standalone operational and credit profile as commensurate with the ‘BB’ rating category due to the company’s moderate size of production and reserves, reliance on dividends from joint ventures and fairly high gross leverage.