KazMunaiGas Close To IPO Move As It Trims Debt Pile

KazMunaiGas Close To IPO Move As It Trims Debt Pile

State-owned energy group is biggest prize in promised Kazakhstan privatisation blitz.

Kazakhstan’s KazMunaiGas is in “an advanced stage” of internal preparations for a public listing, as the country’s largest oil producer works to chip away at its bloated debt pile.

State-owned KazMunaiGas, which accounts for about a third of the Central Asian country’s crude production, is selling assets and pruning its capex spending ahead of a planned listing before 2020.

The oil producer’s float is the biggest prize for investors in Kazakhstan’s promised privatisation blitz that could see $70bn worth of companies head to market.

“We are exploring the IPO route and we are doing our homework, preparing to become a public company,” said chief financial officer Karabayev Dauren. “I think we are in an advanced stage, but there is still some work to be done.”

KazMunaiGas is 90 per cent owned by Kazakhstan’s sovereign wealth fund and 10 per cent owned by the country’s central bank — a legacy of its financial woes when the 2014 oil price crash forced the state to step in with a $4bn injection.

“We need to look at our dividend policy, at introducing some internal processes, things like information disclosure and how we deal with investors,” said Mr Dauren. “But generally we believe that becoming a public company will be very beneficial for KMG, for its corporate and organisation growth and development.

“We can use more of external equity capital, for example, to finance exploration,” he added.

KazMunaiGas has an indirect listing through its 57.9 per cent stake in London-listed KazMunaiGas EP. A botched attempt to buy out minority shareholders in the subsidiary last year failed and raised the ire of investors.

The company’s debt, which stood at about $17bn at the end of 2014, is down to $9.8bn, and will continue to shrink thanks to ongoing sales of non-core assets. A helicopter operator, shipping company, university and refining assets in Romania are all on the block, while capital expenditure is set to fall.

“Present levels of debt and net debt are comfortable for us,” said Mr Dauren, who oversaw the sale of $2.75bn worth of eurobonds in April. “This is also aligned with our capex programmes. We have completed most of our capital intensive projects.”

KazMunaiGas expects production to rise 4 per cent to 23.4m tonnes this year, helped by a doubling of output from the Kashagan project to 370,000 barrels of oil per day by the end of 2017.

The Caspian Sea oilfield, years behind schedule and cast as the world’s most expensive energy project with costs over $50bn, has begun generating positive cash flow, Mr Dauren said.

Kashagan is owned by a consortium of KazMunaiGas, Eni, ExxonMobil, Shell, Total, China National Petroleum Corporation and Inpex.

by Henry Foy 

This article was originally published on THE FINANCIAL TIMES. Read the original article.