10th May 2011 08:00
PRESS - RELEASE
JSC KazMunaiGas Exploration Production
1Q 2011 Financial results
Astana, May 10, 2011. JSC KazMunaiGas Exploration Production ("KMG EP" or "the Company") released its consolidated financial statements for the three months ended March 31, 2011:
·; The average price of Brent in the first three months of 2011 was 38% higher than in the same period last year, up from US$76 per barrel to US$105 per barrel
·; Net profit amounted to 59bn Tenge (US$403m)[1] and earnings per share - 810 Tenge (US$0.9 per GDR), an increase of 14% compared to the same period in 2010.
Production Highlights
In the first three months of 2011 KMG EP's consolidated production was 3,172 thousand tonnes of crude oil (261 kbopd) including the Company's stakes in LLP Kazgermunai JV (KGM), CCEL (CCEL, Karazhanbasmunai) and PetroKazakhstan Inc. (PKI). This is 9 thousand tonnes or 0.3% less than during the same period in 2010.
The Company produced 2,093 thousand tonnes (171 kbopd) of oil at Uzenmunaigas and Embamunaigas production facilities, which is 8 thousand tonnes or 0.4% higher than in the same period of last year. The results of the first quarter were negatively affected by a number of emergency power cuts in the fields, caused by severe weather conditions in March 2011.
The Company's export sales and domestic sales volumes from Uzenmunaigas and Embamunaigas production facilities were 1,682 thousand tonnes (138 kbopd) and 398 thousand tonnes (33 kbopd), respectively.
The Company's share in the production volumes from KGM, CCEL and PKI[2] amounted to 1,079 thousand tonnes of crude oil (90 kbopd), which is 17 thousand tones or 2% less than in the same period in 2010.
The Company's share in the sales volumes from KGM, CCEL and PKI2 was 1,213 thousand tonnes of crude oil (101 kbopd), including 9692 thousand tonnes (81 kbopd) or 80% supplied to export markets.
Net Profit for the Period
Profit after tax (net income) in the first three months of 2011 was 59bn Tenge (US$403m). This represents a 14% growth compared to the same period of 2010, which is mainly explained by a 38% increase in oil price, partly offset by increase in operating taxes, production costs and selling, general and administrative expenses.
Revenue
The Company's revenue in the first three months of 2011 increased by 31%, compared to the same period in 2010 and amounted to 192bn Tenge (US$1,308m). This was due to a 33% increase in the average realized price, from 69,022 Tenge per tonne (US$64.64 per barrel) to 91,682 Tenge per tonne (US$86.61 per barrel).
Taxes Other than on Income
Taxes other than on income in the first three months of 2011 were 73bn Tenge (US$495m), which is 79% higher compared to the same period of 2010. The increase is due to the higher rent and mineral extraction taxes (MET) as a result of the oil price growth, as well as reintroduction of crude oil customs export duty (CED) on 16th August 2010 and its subsequent increase to US$40 per tonne from 1st January 2011.
Production Expenses
Production expenses in the first three months of 2011 were 30bn Tenge (US$203m), which is 37% higher compared to the same period of 2010. A significant part of the production costs increase is due to increase in payroll and repairs and maintenance expenses. Increase in payroll expenses reflects salary increase at the production units from 1st June 2010 and salary indexation from the 1st January 2011. Growth in repairs and maintenance expenses was due to increased number of repaired wells and higher repair cost per well.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the first three months of 2011 were 25bn Tenge (US$173m), which is 22% higher compared to the same period of 2010, mainly due to increase in fines in penalties related to an environmental fine accrual as well as increase in transportation and payroll expenses.
The environmental fine accrual is related to gas flaring at Prorva group of fields when it was not feasible to obtain the required regulatory permissions in a timely manner. The Company accrued the estimated sums in its financial statement for the first quarter of 2011 and intends to appeal the matter with the regional court. The permissions for the remainder of 2011 were obtained in March 2011.
Growth in transportation expenses was mainly due to increased volume of transportation through CPC pipeline and a 9% increase of transportation tariffs imposed by Transneft from 1st January 2011.
Cash Flows
Operating cash flow in the first three months of 2011 was 46bn Tenge (US$317m) compared to 9bn Tenge (US$62m) in same period of 2010.
Capex
Purchases of property, plant and equipment (as per Cash Flow Statement) in the first three months of 2011 were 18bn Tenge (US$122m), representing 68% increase compared to the same period of 2010, in accordance with Capex budget for 2011.
Cash and Debt
Cash and cash equivalents as at 31 March 2011 amounted to 115bn Tenge (US$792m) compared to 99bn Tenge (US$668m) as at 31 December 2010.
Other financial assets (current and non-current) at 31 March 2011 were 607bn Tenge (US$4.2bn) compared to 600bn Tenge (US$4.1bn) as at 31 December 2010. Other financial assets include the debt instrument ("the Bond", see below) issued by National Company "KazMunaiGas" (NC KMG), deposits and other financial instruments.
On 16 July 2010, the Company purchased the Bond issued by NC KMG in the amount of 221.5 billion Tenge (US$1.5bn) which carry an annual coupon of 7% and will mature in June 2013 as per previously disclosed information. KMG EP recognized 3.8bn Tenge (US$26m) interest income from NC KMG Bonds in the first three months of 2011.
As at 31 March 2011, 81% of cash and financial assets (including the Bond) were denominated in foreign currency and 19% were denominated in Tenge. Interest accrued on deposits in banks in the first three months of 2011 was 7.7bn Tenge (US$52m).
Borrowings were 122,2bn Tenge (US$838m) as at 31 March 2011 compared to 122,5bn Tenge (US$831m) as at 31 December 2010. Borrowings include 114bn Tenge (US$784m) of non-recourse debt of KMG PKI Finance B.V. related to the acquisition of the 33% interest in PKI.
Net cash position[3] at 31 March 2011 amounted to 600bn Tenge (US$4.1bn) compared to 576bn Tenge (US$3.9bn) as at 31 December 2010.
Contribution from Strategic Acquisitions
In the first three months of 2011 KMG EP's share of results of associates and joint ventures was 22bn Tenge (US$148m) compared to a 12bn Tenge (US$82m) in same period of 2010. The financial results of associates and joint ventures in the first three months of 2011 were primarily affected by the higher oil price compared to the same period of 2010.
Kazgermunai
In the first three months of 2011 KMG EP recognised a 10.0bn Tenge (US$68m) income from its share in KGM. This amount represents 50% of KGM's net profit of 11.8bn Tenge (US$81m) and 0.9bn Tenge (US$6m) deferred income tax benefit net of 2.1bn Tenge (US$14m) from the effect of purchase price premium amortization and 0.7bn Tenge (US$4m) deferred income tax amortisation.
On March 31, 2011 the partners of Kazgermunai agreed to distribute 200 million US Dollars as a dividend payment. The Company received its 50% share of the above dividend amount on April 6, 2011.
PetroKazakhstan Inc.
In the first three months of 2011 KMG EP recognised a 11.7bn Tenge (US$80m) income from its share in PKI. This amount represents 33% of PKI's net profit of 14.4bn Tenge (US$99m) net of 2.8bn Tenge (US$19m) from the effect of purchase price premium amortization.
CCEL
As of 31 March 2011 the Company has recognised the amount of 20.9bn Tenge (US$143m) as a receivable from CCEL, a jointly controlled entity with CITIC Group. The Company has accrued 0.7bn Tenge (US$5.0m) of interest income for the first three months of 2011 related to the US$26.87m annual priority return from CCEL.
***
The consolidated financial statements for the three months ended March 31, 2011 with Notes are available on the Company's website (www.kmgep.kz).
APPENDIX[4]
Condensed Consolidated Interim Statement of Comprehensive Income (unaudited)
Tenge (000s)
Three months ended March 31, | |||
2011 | 2010 | ||
Revenue | 191,523,819 | 146,056,663 | |
Share of results of associates and joint ventures | 21,689,668 | 12,131,263 | |
Finance income | 7,664,271 | 10,690,463 | |
Total revenue and other income | 220,877,758 | 168,878,389 | |
Production expenses | (29,662,162) | (21,710,857) | |
Selling, general and administrative expenses | (25,383,641) | (20,730,780) | |
Exploration expenses | (48,910) | (383,264) | |
Depreciation, depletion and amortization | (10,773,322) | (7,947,791) | |
Taxes other than on income | (72,535,752) | (40,628,747) | |
Loss on disposal of fixed assets | (615,325) | (26,637) | |
Finance costs | (1,710,165) | (1,964,536) | |
Foreign exchange losses | (7,058,539) | (4,239,971) | |
Profit before tax | 73,089,942 | 71,245,806 | |
Income tax expense | (14,061,911) | (19,566,771) | |
Profit for the period | 59,028,031 | 51,679,035 | |
Exchange difference on translating foreign operations | (1,611,054) | (681,195) | |
Other comprehensive loss for the period, net of tax | (1,611,054) | (681,195) | |
Total comprehensive income for the period, net of tax | 57,416,977 | 50,997,840 | |
EARNINGS PER SHARE | |||
Basic and diluted | 0.81 | 0.71 | |
Condensed Consolidated Interim Statement of Financial Position
Tenge (000s)
March 31, 2011 | December 31, 2010 | ||
Unaudited | Audited | ||
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 304,562,802 | 297,508,553 | |
Intangible assets | 12,196,103 | 15,185,859 | |
Investments in joint ventures | 91,697,775 | 96,737,910 | |
Investments in associates | 150,008,523 | 139,952,442 | |
Receivable from a jointly controlled entity | 18,661,640 | 19,153,089 | |
Other financial assets | 219,082,156 | 221,825,818 | |
Deferred tax asset | 8,092,996 | 8,408,967 | |
Other assets | 10,391,225 | 13,858,297 | |
Total non-current assets | 814,693,220 | 812,630,935 | |
Current assets | |||
Inventories | 18,607,302 | 18,779,936 | |
Taxes prepaid and VAT recoverable | 17,246,652 | 26,529,298 | |
Prepaid expenses | 31,971,624 | 27,815,083 | |
Trade and other receivables | 96,946,102 | 65,529,767 | |
Dividends receivable from a joint venture | 14,562,000 | − | |
Receivable from a jointly controlled entity | 2,191,072 | 1,203,834 | |
Other financial assets | 387,735,512 | 377,800,956 | |
Cash and cash equivalents | 115,380,226 | 98,519,680 | |
Total current assets | 684,640,490 | 616,178,554 | |
Total assets | 1,499,333,710 | 1,428,809,489 | |
EQUITY | |||
Share capital | 209,540,578 | 214,081,197 | |
Other capital reserves | 1,840,005 | 1,739,901 | |
Retained earnings | 990,483,096 | 931,455,065 | |
Other components of equity | 10,765,520 | 12,376,574 | |
Total equity | 1,212,629,199 | 1,159,652,737 | |
LIABILITIES | |||
Non-current liabilities | |||
Borrowings | 61,492,120 | 62,286,045 | |
Deferred tax liability | 1,327,927 | 1,829,852 | |
Provisions | 37,104,667 | 35,625,247 | |
Total non-current liabilities | 99,924,714 | 99,741,144 | |
Current liabilities | |||
Borrowings | 60,662,650 | 60,194,818 | |
Mineral extraction tax and rent tax payable | 62,050,847 | 46,054,359 | |
Trade and other payables | 47,652,573 | 47,304,799 | |
Provisions | 16,413,727 | 15,861,632 | |
Total current liabilities | 186,779,797 | 169,415,608 | |
Total liabilities | 286,704,511 | 269,156,752 | |
Total liabilities and equity | 1,499,333,710 | 1,428,809,489 |
Condensed Consolidated Interim Statement of Cash Flows (unaudited)
Tenge (000s)
Three months ended March 31, | |||
2011 | 2010 | ||
Cash flows from operating activities | |||
Profit before tax | 73,089,942 | 71,245,806 | |
Adjustments to add / (deduct) non-cash items | |||
Depreciation, depletion and amortisation | 10,773,322 | 7,947,791 | |
Share of result of associates and joint ventures | (21,689,668) | (12,131,263) | |
Loss on disposal of property, plant and equipment (PPE) | 615,325 | 26,637 | |
Impairment / (reversal of impairment) of PPE | 16,800 | (29,571) | |
Dry well expense on exploration and evaluation assets | − | 383,264 | |
Recognition of share based payments | 100,104 | 39,402 | |
Unrealised foreign exchange loss / (gain) on non-operating activities | 5,081,538 | (8,828,020) | |
Other non-cash income and expense | 2,039,182 | 289,589 | |
Add finance costs | 1,710,165 | 1,964,536 | |
Deduct finance income relating to investing activity | (7,664,271) | (10,690,463) | |
Working capital adjustments | |||
Change in other assets | 4,973,314 | (7,206,517) | |
Change in inventories | (140,613) | 57,639 | |
Change in taxes prepaid and VAT recoverable | 7,217,846 | (303,946) | |
Change in prepaid expenses | (4,156,541) | (2,502,054) | |
Change in trade and other receivables | (31,335,320) | (12,691,429) | |
Change in trade and other payables | 990,263 | (4,674,571) | |
Change in mineral extraction and rent tax payable | 15,996,488 | 3,466,553 | |
Change in provisions | 407,273 | 553,209 | |
Income tax paid | (11,637,462) | (17,716,592) | |
Net cash generated from operating activities | 46,387,687 | 9,200,000 | |
Cash flows from investing activities | |||
Purchases of PPE | (17,844,980) | (10,597,636) | |
Proceeds from sale of PPE | 407,226 | 18,046 | |
Purchases of intangible assets | (270,906) | − | |
Dividends received from joint ventures and associates | − | 2,434,080 | |
(Purchase) / sale of financial assets held-to-maturity | (8,324,761) | 2,005,033 | |
Deferred payment for acquisition of subsidiary | (416,265) | − | |
Interest received | 1,823,279 | 2,506,835 | |
Net cash used in investing activities | (24,626,407) | (3,633,642) | |
Cash flows from financing activities | |||
Purchase of treasury shares | (4,567,978) | (4,640,640) | |
Repayment of borrowings | (278,363) | (231,682) | |
Dividends paid to Company's shareholders | (52,662) | (38,261) | |
Net cash used in financing activities | (4,899,003) | (4,910,583) | |
Net change in cash and cash equivalents | 16,862,277 | 655,775 | |
Cash and cash equivalents at beginning of the year | 98,519,680 | 107,626,368 | |
Exchange losses on cash and cash equivalents | (1,731) | (15,531) | |
Cash and cash equivalents at the end of the period | 115,380,226 | 108,266,612 | |
The following tables show the Company's realised sales prices adjusted for oil and oil products transportation and other expenses for the three months ended March 31, 2011 and 2010.
1Q 2011 | ||||
(US$/bbl) | UAS | CPC | Domestic | Average |
Benchmark end-market quote[5] | 105.43 | 105.43 | - | - |
Sales price | 98.61 | 104.32 | 26.72 | 87.05 |
Quality bank | - | (8.62) | - | (2.64) |
Premium of bbl difference[6] | (0.09) | 8.76 | - | 2.49 |
Realised price | 98.53 | 104.46 | 26.72 | 86.90 |
Rent tax | 22.87 | 22.88 | - | 22.87 |
Export customs duty | 4.41 | 4.41 | - | 4.41 |
Transportation | 7.59 | 7.83 | 2.02 | 6.69 |
Sales commissions | 0.07 | 0.07 | - | 0.06 |
Adjusted realised price | 63.59 | 69.27 | 24.71 | 52.87 |
1Q 2010 | ||||
(US$/bbl) | UAS | CPC | Domestic | Average |
Benchmark end-market quote5 | 76.36 | 76.36 | - | - |
Sales price | 73.38 | 75.62 | 19.97 | 64.92 |
Quality bank | - | (5.99) | - | (1.62) |
Premium of bbl difference6 | (0.17) | 5.91 | - | 1.51 |
Realised price | 73.21 | 75.55 | 19.97 | 64.81 |
Rental tax | 12.08 | 12.04 | - | 9.97 |
Transportation | 7.70 | 6.76 | 1.58 | 6.37 |
Sales commissions | 0.07 | 0.06 | - | 0.06 |
Adjusted realised price | 53.36 | 56.67 | 18.39 | 48.50 |
| Reference information | 1Q 2011 | 1Q 2010 |
| |
| Average exchange US$/KZT rate | 146.42 | 147.70 |
| |
| End of period US$/KZT rate | 145.70 | 147.11 |
| |
Coefficient barrels to tones for KMG EP crude | 7.36 | ||||
Coefficient barrels to tones for Kazgermunai crude | 7.70 | ||||
Coefficient barrels to tones for CCEL crude | 6.68 | ||||
Coefficient barrels to tones for PKI crude | 7.75 | ||||
Notes to Editors
KMG EP is among the top three Kazakh oil and gas producers. The overall production in 2010 was 13.3mt (an average of 270kbopd) of crude oil, including the Company's share in Kazgermunai, CCEL, PKI and NBK. The total volume of proved and probable reserves, as at the end of 2010 was 232mt (1.7bn bbl), including shares in the associates - about 2.2 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 "BB+" corporate credit rating in July 2010 and "GAMMA-6" rating in November 2010.
For further details please contact us at:
KMG EP. Public Relations (+7 7172 97 7600)
Daulet Zhumadil
E-mail: [email protected]
KMG EP. Investor Relations (+7 7172 97 5433)
Asel Kaliyeva
E-mail: [email protected]
Pelham PR (+44 207 861 3147)
Elena Dobson
E-mail: [email protected]
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] Amounts shown in US dollars ("US$" or " $") have been translated solely for the convenience of the reader at the average rate over the applicable period (average rates: USD/KZT 146.42 - 1Q2011, 147.70 - 1Q2010; period-end rates: USD/KZT 145.70 - 1Q2011, 147.11 - 1Q2010) for information derived from the consolidated statements of income and consolidated statements of cash flows and the end of the period rate for information derived from the consolidated balance sheets.
[2] Including PKI's 50% share in JSC "Turgai-Petroleum" results.
[3] Cash, cash equivalents and other financial assets (including the Bond) less borrowings.
[4] 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.
[5] The Brent (DTD) quoted price is used as benchmark
[6] Average realized price converted at 7.23 barrels per tonne of crude oil
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Kazmunaigaz Exploration