30th Apr 2015 07:02
PRESS - RELEASE
JSC KazMunaiGas Exploration Production
1Q 2015 Financial Results
Astana, 30 April 2015. JSC KazMunaiGas Exploration Production ("KMG EP" or "the Company") announces its condensed consolidated interim financial statements for the three months ended 31 March 2015.
· Revenue in the first three months of 2015 was 117bn Tenge (US$632m)[1], which is 47% lower compared with the same period of 2014. The lower revenue was the result of a 50% decline in Brent price from US$108.2 per bbl in 1Q2014 to US$53.9 per bbl in 1Q2015 and a 53% decline in average domestic realized price from 48 th. Tenge per tonne in 1Q2014 to 23 th. Tenge per tonne in 1Q2015.
· Production expenses in the first three months of 2015 were 58bn Tenge (US$314m), a 32% increase compared with the same period of 2014 mainly due to increased employee benefit expenses.
· Net profit for the first three months of 2015 was 1.6bn Tenge (US$9m) compared with 123bn Tenge (US$727m) in the same period of 2014. A decline in net profit in 1Q2015 was largely due to lower revenue and lower foreign exchange gain.
· The net cash position[2] as at 31 March 2015 amounted to 696bn Tenge (US$3.8bn) compared with 727bn Tenge (US$4.0bn) as at 31 December 2014.
Production Highlights
KMG EP, including its stakes in Kazgermunai (KGM), CCEL (CCEL) and PetroKazakhstan Inc. (PKI), produced 3,037 thousand tonnes of crude oil (250 kbopd) for the first three months of 2015, slightly less than in the same period of 2014.
Ozenmunaigas JSC (OMG) production increased by 3% to 1,339 thousand tonnes (110 kbopd) in comparison to the same period of 2014, largely due to a higher level of production in the beginning of the year, drilling new wells ahead of plan and conducting geological and technical works to restore production at existing wells. OMG production in 1Q2015 is 2% higher than planned largely due to ahead of plan production drilling. Embamunaigas JSC (EMG) produced 682 thousand tonnes (56 kbopd), similar to the same period in 2014. At OMG and EMG, total volume of oil production was 2,021 thousand tonnes (166 kbopd), a 2% increase in comparison with the same period in 2014.
The Company's share in production from CCEL, KGM and PKI for the first quarter of 2015 amounted to 1,016 thousand tonnes (84 kbopd) which is 4% less than the same period in 2014, due to the natural decline of production by 11% in PKI and by 3% in KGM, in line with production plan for 2015.
Crude oil and oil products sales
In the first quarter of 2015, the Company's combined export sales from OMG and EMG were 1,441 thousand tonnes (116 kbopd) or 71% of the total oil sales volumes. Domestic sales amounted to 562 thousand tonnes (45 kbopd) of which 505 thousand tonnes (41 kbopd) were supplied to the Atyrau Refinery from OMG and EMG; 40 thousand tonnes (3 kbopd) were supplied to the Pavlodar Refinery from EMG and 17 thousand tonnes (1 kbopd) of oil products were sold after processing. Additionally, 20 thousand tonnes (2 kbopd) were shipped to Russia to fulfill obligations under the counter-oil supply agreement between the Government of Kazakhstan and the Russian Government.
The Company's share in the sales from CCEL, KGM and PKI was 991 thousand tonnes of crude oil (82 kbopd), including 493 thousand tonnes (40 kbopd) shipped to export, which is 50% of the total sales volumes. The domestic sales volume was 498 thousand tonnes (42 kbopd) of which 321 thousand tonnes (28 kbopd) were supplied to Pavlodar Petrochemical Plant, 117 thousand tonnes (10 kbopd) were supplied to Shymkent Refinery, 37 thousand tonnes (2.7 kbopd) were supplied to Atyrau Refinery and 22 thousand tonnes (1.7 kbopd) to Aktau Bitumen Plant.
Net Profit for the Period
Net profit in the first three months of 2015 was 1.6bn Tenge (US$9m) compared with 123bn Tenge (US$727m) in the same period of 2014. A decline in net profit in 1Q2015 is largely due to lower revenue and lower foreign exchange gain.
Revenue
The Company's revenue in the first three months of 2015 was 117bn Tenge (US$632m), which is 47% lower compared with the same period of 2014. This is due to a 50% decline in Brent price from US$108.2 per bbl in 1Q2014 to US$53.9 per bbl in 1Q2015 and a 53% decline in average domestic realized price from 48 th. Tenge per tonne in 1Q2014 to 23 th. Tenge per tonne in 1Q2015. Domestic realized price in 1Q2015 was 22.4 th. tenge per tonne at the Atyrau refinery and 30.0 th. Tenge per tonne at the Pavlodar refinery but these prices have yet to be approved by the KMG EP Board.
Taxes other than on Income
Taxes, other than onincome, in the first three months of 2015 were 48bn Tenge (US$262m), which is 40% lower than in the same period of 2014. This was largely due to a decline in rent tax and MET, which was partially offset by an increase in export customs duty (ECD). Decline in rent tax and MET expenses is due to a 50% lower Brent price in 1Q2015 compared with the same period of 2014. ECD rate increased from US$60 to US$80 per tonne from April 2014. From 19 March 2015 ECD rate was reduced from US$80 to US$60 per tonne.
Production Expenses
Production expenses in the first three months of 2015 were 58bn Tenge (US$314m), 32% higher than in the same period of 2014, mainly due to higher expenses for production personnel employee benefits.
Expenses for employee benefits in the first three months of 2015 increased by 58% compared with the same period of 2014. This was largely due to an indexation of salary for production personnel by 7% in January 2015, the introduction of a Unified System of Wages for production employees from April 2014 and a 10% increase in wages related to the devaluation of the Tenge from April 2014 and an increase in production bonuses from 25% to 33% for supporting production personnel from September 2014.
Expenses for employee benefits in 1Q2015 increased by 12% compared with 4Q2015 largely due to an indexation of salary for production personnel by 7% starting from January 2015.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in 1Q2015 were 26bn Tenge (US$143m), which is 19% higher than in 1Q2014. This was largely due to an increase in accruals for fines and penalties, higher expenses for employee benefits and an increase in transportation expenses. In 1Q2015 additional accruals for fines and penalties were made based on the preliminary results of tax audit for 2009-2012.
Cash Flows from Operating Activities
Net cash used in operating activities in the first three months of 2015 was 27bn Tenge (US$148m) compared with net cash generated from operating activities at 98bn Tenge (US$579m) in the same period of 2014 mainly as a result of lower revenue in 1Q2015.
Capital expenditure
Capital expenditure[3] in the first three months of 2015 was 31bn Tenge (US$166m), which is 35% higher compared with the same period of 2014 as a result of ahead of plan production drilling at OMG aiming higher production level and an increase in construction expenses and investments in modernization of production facilities compared with 1Q2014 at OMG and EMG. In the first three months of 2015, 87 wells were drilled at OMG and EMG compared with the plan of 25 wells in the reported period.
Cash and Debt
Cash and cash equivalents as at 31 March 2015 amounted to 115bn Tenge (US$0.6bn) compared with 180bn Tenge (US$1.0bn) as at 31 December 2014. Other financial assets as at 31 March 2015 were 588bn Tenge (US$3.2bn) compared with 554bn Tenge (US$3.0bn) as at 31 December 2014.
As at 31 March 2015, 95% of cash and financial assets were denominated in foreign currencies and 5% were denominated in Tenge. Finance income accrued on cash, financial, and other assets in the first three months of 2015 was 6bn Tenge (US$34m) compared with 5bn Tenge (US$31m) in 1Q2014.
Borrowings as at 31 March 2015 were 7.1bn Tenge (US$38m), compared with 7.2bn Tenge (USD$40m) as at 31 December 2014.
The net cash position[4] as at 31 March 2015 amounted to 696bn Tenge (US$3.8bn) compared with 727bn Tenge (US$4.0bn) as at 31 December 2014.
Share of results of associate and joint ventures
In the first three months of 2015, KMG EP's share of results of associate and joint ventures was 19bn Tenge (US$100m) compared with 16bn Tenge (US$95m) in 1Q2014.
Kazgermunai
In the first three months of 2015, KMG EP recognised 8bn Tenge (US$41m) of income from its share in KGM. This amount represents 6bn Tenge (US$31m) corresponding to 50% of KGM's net profit, with the effect of the 1.8bn Tenge (US$10m) impact from amortization of the fair value of licenses, the related deferred tax and revised effective income tax rate used to calculate deferred tax.
KGM's net profit in US dollars in the first three months of 2015 declined by 54% compared with the same period of 2014. This was largely due to lower revenue because of a 50% decline in Brent price and 11% lower export volumes.
In the first three months of 2015 KMG EP received US$25m as dividends from KGM.
PetroKazakhstan Inc.
In the first three months of 2015, KMG EP recognised 2.7bn Tenge (US$15m) of loss from its share in PKI. This amount represents 1.2bn Tenge (US$6m) corresponding to 33% of PKI's net loss, net of the 1.5bn Tenge (US$8m) effect of amortization of the fair value of the licenses.
In the first three months of 2015, PKI's net loss in US dollars was US$20m compared with net profit of US$165m in the same period of 2014, which was largely due to a 12% decline in sales volumes, reallocation of export volumes to the domestic markets and lower average Brent price and domestic prices.
CCEL
As of 31 March 2015, the Company had 19.5bn Tenge (US$105m) as a receivable from CCEL, a jointly controlled entity with CITIC Resources Holdings Limited. The Company has accrued 0.7bn Tenge (US$3.6m) of interest income in the first three months of 2015 related to the US$26.87m annual priority return from CCEL.
***
The condensed consolidated interim financial statements for the three months ended March 31, 2015, the notes thereto, and the operating and financial review for the period is available on the Company's website (www.kmgep.kz).
APPENDIX
Consolidated Interim Statement of Comprehensive Income (unaudited)
Tenge million
Three months ended March 31, | ||
2015 | 2014 | |
Revenue | 116,732 | 220,824 |
Share of results of associate and joint ventures | 18,526 | 16,160 |
Finance income | 6,188 | 5,236 |
Total revenue and other income | 141,446 | 242,220 |
Production expenses | (57,964) | (43,793) |
Selling, general and administrative expenses | (26,440) | (22,244) |
Exploration expenses | (349) | (258) |
Depreciation, depletion and amortization | (4,346) | (15,056) |
Taxes other than on income | (48,379) | (80,280) |
Impairment of property, plant and equipment | − | (27,448) |
Loss on disposal of property, plant and equipment | (72) | (223) |
Finance costs | (15,053) | (806) |
Foreign exchange gain, net | 17,055 | 108,113 |
Profit before tax | 5,898 | 160,225 |
Income tax expense | (4,316) | (36,767) |
Profit for the period | 1,582 | 123,458 |
Foreign currency translation difference | 358 | 52,334 |
Other comprehensive income for the period to be reclassified to profit and loss in subsequent periods | 358 | 52,334 |
Total comprehensive income for the period, net of tax | 1,940 | 175,792 |
EARNINGS PER SHARE - Tenge thousands | ||
Basic and diluted | 0.02 | 1.81 |
Consolidated Interim Statement of Financial Position
Tenge million
March 31, 2015 | December 31, 2014 | |
Unaudited | Audited | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 187,116 | 156,436 |
Intangible assets | 10,758 | 10,855 |
Investments in joint ventures | 113,271 | 95,177 |
Investments in associate | 115,185 | 116,054 |
Receivable from a jointly controlled entity | 14,713 | 13,808 |
Loans receivable from joint ventures | 13,029 | 25,738 |
Other financial assets | 19,532 | 18,567 |
Deferred tax asset | 84,595 | 84,067 |
VAT recoverable | 43,083 | 42,300 |
Other assets | 14,816 | 15,472 |
Total non-current assets | 616,098 | 578,474 |
Current assets | ||
Inventories | 21,059 | 26,357 |
Income taxes prepaid | 41,060 | 23,916 |
Taxes prepaid and VAT recoverable | 34,607 | 37,831 |
Mineral extraction tax prepaid and rent tax prepaid | 1,264 | 2,581 |
Prepaid expenses | 22,589 | 30,011 |
Trade and other receivables | 58,598 | 56,570 |
Receivable from a jointly controlled entity | 4,742 | 4,658 |
Loans receivable from joint ventures | 8,110 | 7,692 |
Other financial assets | 568,519 | 535,513 |
Cash and cash equivalents | 115,304 | 180,245 |
Total current assets | 875,852 | 905,374 |
Total assets | 1,491,950 | 1,483,848 |
EQUITY | ||
Share capital | 163,004 | 163,004 |
Other capital reserves | 2,355 | 2,355 |
Retained earnings | 1,099,752 | 1,098,170 |
Other components of equity | 75,945 | 75,587 |
Total equity | 1,341,056 | 1,339,116 |
LIABILITIES | ||
Non-current liabilities | ||
Borrowings | 4,046 | 4,218 |
Deferred tax liability | 568 | 569 |
Provisions | 42,115 | 34,929 |
Total non-current liabilities | 46,729 | 39,716 |
Current liabilities | ||
Borrowings | 3,082 | 3,000 |
Provisions | 13,958 | 8,287 |
Income taxes payable | 13 | 15 |
Mineral extraction tax and rent tax payable | 23,310 | 34,200 |
Trade and other payables | 63,802 | 59,514 |
Total current liabilities | 104,165 | 105,016 |
Total liabilities | 150,894 | 144,732 |
Total liabilities and equity | 1,491,950 | 1,483,848 |
Consolidated Interim Statement of Cash Flows (unaudited)
Tenge million
Three months ended March 31, | ||
2015 | 2014 | |
Cash flows from operating activities | ||
Profit before tax | 5,898 | 160,225 |
Adjustments to add / (deduct) non-cash items | ||
Depreciation, depletion and amortisation | 4,346 | 15,056 |
Share of result of associate and joint ventures | (18,526) | (16,160) |
Loss on disposal of property, plant and equipment (PPE) | 72 | 223 |
Impairment of PPE | − | 27,448 |
Dry well expense on exploration and evaluation assets | 51 | 46 |
Unrealised foreign exchange gain on non-operating activities | (15,968) | (57,640) |
Other non-cash income and expense | 543 | (136) |
Add finance costs | 15,053 | 806 |
Deduct finance income | (6,188) | (5,236) |
Working capital adjustments | ||
Change in other assets | (1,932) | 14 |
Change in inventories | 5,267 | 2,665 |
Change in taxes prepaid and VAT recoverable | 3,234 | (2,702) |
Change in prepaid expenses | 7,423 | (225) |
Change in trade and other receivables | (1,603) | 7,249 |
Change in trade and other payables | (1,067) | (6,376) |
Change in mineral extraction and rent tax payable and prepaid | (10,185) | (1,061) |
Change in provisions | 3,941 | 419 |
Income tax paid | (17,589) | (26,278) |
Net cash (used in) / generated from operating activities | (27,230) | 98,337 |
Cash flows from investing activities | ||
Purchases of PPE | (22,401) | (33,017) |
Proceeds from sale of PPE | 3 | 247 |
Purchases of intangible assets | (322) | (515) |
Loans provided to joint ventures | (277) | (519) |
Dividends received from joint venture | 4,626 | − |
(Purchase) / Proceeds from withdrawal of financial assets held to maturity | (22,346) | 97,077 |
Interest received | 1,759 | 2,635 |
Net cash (used in) / generated from investing activities | (38,958) | 65,908 |
Cash flows from financing activities | ||
Repayment of borrowings | (273) | (267) |
Dividends paid to Company's shareholders | (38) | (29) |
Net cash used in financing activities | (311) | (296) |
Net change in cash and cash equivalents | (66,499) | 163,949 |
Cash and cash equivalents at beginning of the period | 180,245 | 119,036 |
Exchange gain / (losses) on cash and cash equivalents | 1,558 | (23) |
Cash and cash equivalents at the end of the period | 115,304 | 282,962 |
The following tables show the Company's realised sales prices adjusted for oil transportation and other expenses for the three months ended March 31, 2015[5].
3M2015 | |||||
(US$/bbl) | UAS | CPC | Atyrau refinery | Pavlodar refinery | Shipments to Russia |
Benchmark end-market quote | 53.9 | 53.9 | - | - | - |
Quality bank | - | (5.7) | - | - | - |
Price differential | (3.5) | (1.3) | - | - | - |
Realised price | 50.4 | 46.9 | 16.8 | 22.5 | 38.0 |
Rent tax | (6.2) | (5.3) | - | - | - |
Export customs duty | (10.9) | (10.1) | - | - | - |
MET | (6.1) | (5.6) | (2.7) | (2.7) | (3.6) |
Transportation | (8.2) | (6.5) | (1.5) | (7.8) | (5.4) |
Netback | 19.0 | 19.4 | 12.6 | 12.0 | 29.0 |
Premium of bbl difference | - | 4.0 | - | - | - |
Effective netback incl. premium of bbl difference | 19.0 | 23.4 | 12.6 | 12.0 | 29.0 |
3M2014 | |||||
(US$/bbl) | UAS | CPC | Atyrau refinery | Pavlodar refinery | Shipments to Russia |
Benchmark end-market quote | 108.2 | 108.2 | - | - | - |
Quality bank | - | (6.9) | - | - | - |
Price differential | (3.2) | (1.7) | - | - | - |
Realised price | 105.0 | 99.6 | 39.1 | - | - |
Rent tax | (23.1) | (21.0) | - | - | - |
Export customs duty | (8.0) | (7.3) | - | - | - |
MET | (11.9) | (10.9) | (2.3) | ||
Transportation | (8.5) | (7.2) | (1.7) | - | - |
Netback | 53.5 | 53.2 | 35.1 | - | - |
Premium of bbl difference | - | 8.4 | - | - | - |
Effective netback incl. premium of bbl difference | 53.5 | 61.6 | 35.1 | - | - |
Reference information | 3M2014 | 3M2015 |
Average exchange US$/KZT rate | 169.77 | 184.58 |
End of period US$/KZT rate | 182.04 | 185.65 |
Coefficient barrels to tonnes for KMG EP crude (production) | 7.36 | |
Coefficient barrels to tonnes for KMG EP crude (sales) | 7.23 | |
Coefficient barrels to tonnes for Kazgermunai crude | 7.70 | |
Coefficient barrels to tonnes for CCEL crude | 6.68 | |
Coefficient barrels to tonnes for PKI crude | 7.75 | |
Notes to editors
KMG EP is among the top three Kazakh oil producers. The overall production in 2014 was 12.3 million tonnes (250 kbopd) of crude oil, including the Company's share in Kazgermunai, CCEL and PKI. The Company's total consolidated volume of proved and probable reserves including shares in the associates, as at the end of 2014 was 177 million tonnes (1,303 mmbbl), out of which 132 million tonnes (981 mmbbl) relates to Ozenmunaigas, Embamunaigas, and Ural Oil and Gas (Rozhkovskoye field, Fyodorovskiy block). 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.
For further details please contact us at:
KMG EP. Investor Relations (+7 7172 97 5433)
Asel Kaliyeva
e-mail: [email protected]
KMG EP. Public Relations (+7 7172 97 79 08)
Elena Pak
e-mail: [email protected]
Brunswick Group (+44 207 404 5959)
Andrew Mitchell
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 "$") have been translated solely for the convenience of the reader at the average rate over the applicable period for information derived from the consolidated statements of income and consolidated statements of cashflows and the end of the period rate for information derived from the consolidated balance sheets (average rates for 1Q2015 and 1Q2014 were 184.58 and 169.77 Tenge/US$, respectively; period-end rates at December 31, 2014 and December 31, 2013 were 185.65 and 182.04 Tenge/US$, respectively).
[2] Cash, cash equivalents and other financial assets less borrowings
[3] The Company revised its approach to calculation of capital expenditure. Starting from 4Q 2013 the Capex represents amount of additions to property, plant and equipment. Formerly it represented purchases of property, plant and equipment and intangible assets according to the Cash Flow Statement.
[4] Cash, cash equivalents and other financial assets less borrowings
[5] The netback calculation methodology has been changed starting from 1Q2015 to include MET subtraction from the netback. As a result comparative information for 1Q 2014 has been restated as well.
Related Shares:
Kazmunaigaz Exploration