KMG EP May Acquire New Assets In 2017 Due To Low Profitability Of Old Deposits

JSC KazMunaiGas Exploration Prod - KMG EP Trading Update January 2017

Exploration and Production KazMunaiGas (EP KMG) may acquire new assets in 2017, said Rasul Rysmambetov, financial analyst.

“The company has good financial reserves and I don’t exclude that KMG EP may attempt to acquire a stake in Ansagan field from Almex Plus Ltd in 2017,” he said to KazTAG.

In his words, KMG EP has demonstrated positive operational profit by the results of three quarters 2016. Only the loss caused by the rates fluctuation following tenge strengthening frustrated the positive tendency as the company most likely holds its major reserves in US dollars. The company is stable in other terms”, he said.

“For this moment KMG EP holds the loan disbursements under control many of which are in dollars. Under conservative approach the profit in the 3rd quarter 2015 looks unusual- as it was high due to tenge rate jump. In the financial report we can see KMG EP was actively depositing its funds on its accounts in 2016, while there was money withdrawal in 2015,” said R. Rysmambetov.

In his words low labor productivity in the company is explained by the fact that the majority of the deposits overpassed their peak production and tend to get unprofitable following drop of oil prices to $40-$52 per barrel. Due to social functions of oil production in many regions KMG EP cannot afford a classical market approach to expenses on its deposits.

Aidarkhan Kusainov, head of Almagest consulting company, supports the opinion.

“KMG EP has old deposits with declining oil production volumes. Consequently the cost price of hydrocarbons is growing as it needs stimulation. As for the new wells, roughly speaking, insert a pipe and oil flows. It is an objective reason, because of this the company cannot be highly efficient and profitable,” he said.

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