13th Mar 2013 07:00
PRESS - RELEASE
JSC KazMunaiGas Exploration Production
2012 Financial Results
Astana,13 March 2012. JSC KazMunaiGas Exploration Production ("KMG EP" or "the Company") announces its consolidated financial statements for the year ended December 31, 2012.
·; Revenues of 797bn tenge (US$5,346m), which is 11% higher than 2011 mainly due to higher export volumes and higher domestic prices.
·; Net profit of 161bn tenge (US$1,079m) and earnings per share of 2,320 tenge (US$2.59 per GDR), a decrease of 23% and 21%, respectively,compared to 2011.
·; The average price of Brent in 2012 was US$112 per barrel, almost same as in 2011.
Production Highlights
In 2012 KMG EP produced 12,191 thousand tonnes of crude oil (247 kbopd), including the Company's stakes in Kazgermunai (KGM), CCEL (Karazhanbasmunai, CCEL) and PetroKazakhstan Inc. (PKI) which is 1% less than in 2011.
JSC Uzenmunaigas (UMG) produced 4,950 thousand tonnes (100 kbopd), which is 132 thousand tonnes less than in 2011. JSC Embamunaigas (EMG) produced 2,816 thousand tonnes (57 kbopd), which is similar to the volume produced in 2011. The total volume of oil produced at UMG and EMG is 7,766 thousand tonnes (156 kbopd).
The Company's share in the production from KGM, CCEL and PKI for 2012 amounted to 4,425 thousand tonnes of crude oil (91 kbopd), approximately equivalent to 2011.
Crude oil sales
In 2012 the Company's export and domestic sales from UMG and EMG were 6,078 thousand tonnes (122 kbopd) and 1,637 thousand tonnes (33 kbopd) respectively.
The Company's share of sales from KGM, CCEL and PKI was 4,412 thousand tonnes of crude oil (90 kbopd), including 3,430 thousand tonnes (70 kbopd) or 78% of total sales supplied to export markets.
Net Profit for the Period
Profit after tax (net income) in 2012 was 161bn tenge (US$1,079m), representing a 23% decrease compared to 2011, mainly due to impairment of assets, higher income taxes, higher employee costs and lower share of income from associates and joint ventures, partially offset by the benefits of higher export volumes and higher prices for domestic supply.
Revenues
The Company's revenues in 2012 amounted to 797bn tenge (US$5,346m), which is 11% higher than in 2011. This resulted from a 6% increase in export volumes and a 39% increase in domestic selling prices, compared to 2011.
Taxes other than on Income
Taxes, other than on income, in 2012 were 274bn tenge (US$1,839m), which is 3% lower compared to 2011, mainly due to non-repeated expense of 15bn tenge (US$105m) for export duty charge in 2011 and lower expenses from mineral extraction tax. This was almost fully offset by increased rent tax costs, which resulted from higher export volumes.
Production Expenses
Production expenses in 2012 were 140bn tenge (US$941m), which is 19% higher than in 2011. A significant part of the production cost increase is due to higher expenses for employee costs, energy charges and a change in crude oil balance. These were partially offset by a reduction in repair and maintenance expenses due to a decrease in the number of repaired wells and of hydrofracturing in line with the production programme, as well as adverse weather conditions at the beginning of the year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in 2012 were 93bn tenge (US$624m), which is 6% lower than in 2011. The decrease is mainly due to lower expenses for penalties and fines and lower management fees to National Company Kazmunaigas from 8.3bn tenge (US$57m) to 4.0bn tenge (US$27m), partially offset by higher transportation expenses as a result of higher export volumes.
Expenses of two new service company established in beginning of 2012
Operating expenses of two new transportation and drilling companies were 10.9bn tenge (US$73m) in 2012. Part of payments for employees not involved in the core business of these two companies amounting to 2.6bn tenge (US$17m) were classified as selling, general and administrative expenses. The remaining expenses were classified as production expenses.
Capital expenditures of these two companies amounted to 14.2bn tenge (US$95m) in 2012.
Fines and penalties
On July 12, 2012 the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan completed the 2006-2008 comprehensive tax audit of the Company. As a result of this tax audit, which commenced in October 2011, the tax authorities estimated additional taxes for the Company of 16.9bn tenge, including 5.8bn tenge of tax, 7.2bn tenge of administrative fines and 4.0bn tenge of late payment interest. The Company is currently appealing to the Tax Committee of the Ministry of Finance. (For more details, please see note 26 in consolidated financial statements).
Cash Flows from Operating Activities
Operating cash flow in 2012 was 155bn tenge (US$1,039m), which is 4% higher than in 2011. Higher revenues were almost fully offset by increased income tax expenses and changes in working capital.
Capex
Purchases of property, plant and equipment and intangible assets (as per Cash Flow Statement) in 2012 were 108bn tenge (US$725m), which is 3% higher than in 2011. Of this amount, 8.3bn tenge (US$56m) was spent on exploration drilling.
Cash distribution to stockholders
On 30 May, 2012 KMG EP declared 91bn tenge (US$615m) as dividends for the year 2011. The approved dividend was the highest since IPO in 2006.
In 2012, the Company spent around 36bn tenge (US$242m) on the buy back of 15,630 common shares and 13,106,856 global depositary receipts.
Cash and Debt
Cash and cash equivalents as at December 31, 2012 amounted to 155bn tenge (US$1.0bn) compared to 207bn tenge (US$1.4bn)as at December 31, 2011.
Other financial assets (current and non-current) at December 31, 2012 were 552bn tenge (US$3.7bn) compared to 511bn tenge (US$3.4bn) as at December 31, 2011. Other financial assets include the NC KMG Bond, deposits and additional financial instruments. As at December 31, 2012 the outstanding amount of the Bond was 134bn tenge (US$891m).
78% of cash and financial assets (including the Bond) as at December 31, 2012 was denominated in foreign currencies and 22% was denominated in tenge. Financial income accrued on cash and financial assets (including the Bond) in 2012 was 34.5bn tenge (US$232m).
Borrowings as at December 31, 2012 were 7.3bn tenge (US$48m), compared to 88bn tenge (US$593m) as at December 31, 2011. In the third quarter of 2012, the Company fully repaid its non-recourse debt to KMG PKI Finance B.V. related to the acquisition of the 33% interest in PKI in December of 2009.
The net cash position as at 31 December 2012 was 699bn tenge (US$4.6bn) compared to 629bn tenge (US$4.2bn) as at 31 December 2011.
Income from associates and joint ventures
In 2012, KMG EP's share in income from associates and joint ventures was 67bn tenge (US$452m), 20% lower compared to 2011. This was mainly driven by redistribution of selling volumes from export to domestic and higher income tax expenses.
Kazgermunai
In 2012 KMG EP recognised 33bn tenge (US$224m) of income from its share in Kazgermunai (KGM). KGM's net income decreased by 3% in 2012 compared to 2011, mainly due to redistribution of selling volumes from export to domestic and higher income tax expenses.
PetroKazakhstan Inc.
In 2012 KMG EP recognised 34bn tenge (US$226m) of income from its share in PetroKazakhstan Inc. (PKI). PKI's net income decreased by 25% in 2012 compared to 2011. This was mainly due to the decrease in the volume of oil purchased from third parties in order to fulfill obligations to supply to domestic market (replacement agreement) from 1,301 thousand tonnes in 2011 to 211 thousand tonnes in 2012 which led to a decline in export volumes and higher income tax expenses.
CCEL
As of December 31, 2012 the Company has recognised 18,2bn tenge (US$121m) as a receivable from CCEL, a jointly controlled entity with CITIC Group. The Company has accrued 2.7bn tenge (US$18m) of interest income in 2012 related to the US$26.87m annual priority return from CCEL. The remaining US$8.6m were considered as a reduction of accounts receivable from CCEL.
Impairment of assets
As a result of level of production being materially lower than planned in the last two years and the increasing levels of operational and capital expenditure management of the Company has carried out an assessment of the recoverable amount of JSC "OzenMunaiGas". The result of this assessment indicated that the carrying value of JSC "OzenMunaigas" assets exceeded the estimated recoverable amount by 75 billion Tenge (around US$500m) resulting in an impairment charge during 2012 (please see notes 6 and 20 of consolidated financial statements).
Management believes that this impairment charge on JSC "OzenMunaiGas" assets could be reversed in future periods if actual production over the next years exceeds expectations used in this impairment assessment.
New appointment
In February 2013, Bakhyt Imanbayev was appointed as a Deputy General Director for Production and elected as a member of the Management Board for the term of Board competence.
***
The consolidated financial statements for the year ended December 31, 2012, the notes thereto, and the operating and financial review for the period are available on the Company's website (www.kmgep.kz).
APPENDIX
Consolidated Statement of Comprehensive Income
Tenge million
For the year ended December 31, | |||
2012 | 2011 | ||
Revenue | 797,170 | 721,194 | |
Share of results of associate and joint ventures | 67,442 | 84,276 | |
Finance income | 34,528 | 28,843 | |
Total revenue and other income | 899,140 | 834,313 | |
Production expenses | (140,362) | (117,465) | |
Selling, general and administrative expenses | (93,088) | (98,520) | |
Exploration expenses | (6,104) | (5,985) | |
Depreciation, depletion and amortization | (53,747) | (45,494) | |
Taxes other than on income | (274,171) | (284,028) | |
Impairment of property, plant and equipment | (77,012) | (1,653) | |
Loss on disposal of fixed assets | (3,189) | (4,044) | |
Finance costs | (7,231) | (7,223) | |
Foreign exchange gain | 9,513 | 2,691 | |
Profit before tax | 253,749 | 272,592 | |
Income tax expense | (92,926) | (63,661) | |
Profit for the year | 160,823 | 208,931 | |
Exchange difference on translating foreign operations | 3,655 | 1,978 | |
Other comprehensive income for the year, net of tax | 3,655 | 1,978 | |
Total comprehensive income for the year, net of tax | 164,478 | 210,909 | |
EARNINGS PER SHARE - Tenge thousands | |||
Basic and diluted | 2.32 | 2.95 | |
Condensed Consolidated Interim Statement of Financial Position
Tenge million
As at December 31, | |||
2012 | 2011 | ||
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 325,520 | 338,860 | |
Intangible assets | 19,584 | 26,638 | |
Investments in joint ventures | 89,252 | 116,526 | |
Investments in associate | 118,959 | 133,228 | |
Receivable from a jointly controlled entity | 14,326 | 18,138 | |
Loans receivable from joint ventures | 13,150 | 8,494 | |
Other financial assets | 1,085 | 188,803 | |
Deferred tax asset | 31,968 | 9,450 | |
Other assets | 17,200 | 19,593 | |
Total non-current assets | 631,044 | 859,730 | |
Current assets | |||
Inventories | 25,058 | 22,651 | |
Income taxes prepaid | 17,806 | 9,971 | |
Taxes prepaid and VAT recoverable | 56,257 | 22,738 | |
Mineral extraction tax prepaid | 8,073 | − | |
Prepaid expenses | 15,539 | 12,054 | |
Trade and other receivables | 101,168 | 84,126 | |
Receivable from a jointly controlled entity | 3,895 | 1,361 | |
Other financial assets | 550,556 | 321,890 | |
Cash and cash equivalents | 154,705 | 206,512 | |
Total current assets | 933,057 | 681,303 | |
Total assets | 1,564,101 | 1,541,033 | |
EQUITY | |||
Share capital | 162,952 | 198,452 | |
Other capital reserves | 2,474 | 2,124 | |
Retained earnings | 1,154,335 | 1,083,749 | |
Other components of equity | 18,009 | 14,354 | |
Total equity | 1,337,770 | 1,298,679 | |
LIABILITIES | |||
Non-current liabilities | |||
Borrowings | 4,848 | 33,034 | |
Deferred tax liability | − | 2,049 | |
Provisions | 36,927 | 37,846 | |
Total non-current liabilities | 41,775 | 72,929 | |
Current liabilities | |||
Borrowings | 2,462 | 54,931 | |
Income taxes payable | 32,103 | − | |
Mineral extraction tax and rent tax payable | 50,417 | 50,908 | |
Trade and other payables | 82,255 | 48,680 | |
Provisions | 17,319 | 14,906 | |
Total current liabilities | 184,556 | 169,425 | |
Total liabilities | 226,331 | 242,354 | |
Total liabilities and equity | 1,564,101 | 1,541,033 | |
Consolidated Statement of Cash Flows
Tenge million
For the year ended December 31, | |||
2012 | 2011 | ||
Cash flows from operating activities | |||
Profit before tax | 253,749 | 272,592 | |
Adjustments to add / (deduct) non-cash items | |||
Depreciation, depletion and amortization | 53,747 | 45,494 | |
Share of result of associates and joint ventures | (67,442) | (84,276) | |
Loss on disposal of property, plant and equipment (PPE) | 3,189 | 4,044 | |
Impairment of PPE and intangible assets | 77,012 | 2,439 | |
Dry well expense on exploration and evaluation assets | 4,321 | 2,586 | |
Recognition of share-based payments | 354 | 408 | |
Forfeiture of share-based payments | (4) | (24) | |
Unrealised foreign exchange gain on non-operating activities | (6,835) | (2,306) | |
Other non-cash income and expense | 420 | 4,591 | |
Add finance costs | 7,231 | 7,223 | |
Deduct finance income | (34,528) | (28,843) | |
Working capital adjustments | |||
Change in other assets | 101 | (817) | |
Change in inventories | (2,267) | (4,822) | |
Change in taxes prepaid and VAT recoverable | (33,519) | (2,105) | |
Change in prepaid expenses | (3,577) | 15,839 | |
Change in trade and other receivables | (16,599) | (18,487) | |
Change in trade and other payables | 13,925 | (3,600) | |
Change in mineral extraction and rent tax payable | (8,564) | 4,854 | |
Change in provisions | 10,663 | 7,621 | |
Income tax paid | (96,498) | (74,201) | |
Net cash generated from operating activities | 154,879 | 148,210 | |
Cash flows from investing activities | |||
Purchases of PPE | (99,240) | (92,760) | |
Proceeds from sale of PPE | 1,054 | 753 | |
Purchases of intangible assets | (8,874) | (12,218) | |
Acquisition of share in a joint venture | − | (23,907) | |
Loans provided to the joint ventures | (5,081) | (1,923) | |
Dividends received from joint ventures and associate, net of withholding tax | 114,207 | 89,795 | |
Interest received from investment in Debt Instruments of NC KMG | 11,280 | 13,006 | |
(Purchase) / sale of financial assets held to maturity | (85,257) | 56,836 | |
Proceeds from sale of other financial assets | 5,546 | − | |
Repayments of loans receivable from related parties | 7,657 | 3,940 | |
Proceeds from disposal / (acquisition) of subsidiary, net of cash acquired | 3,601 | (8,799) | |
Interest received | 2,976 | 9,603 | |
Net cash (used in) / generated from investing activities | (52,131) | 34,326 | |
Cash flows from financing activities | |||
Share buy back | (36,203) | (15,763) | |
Repayment of borrowings | (81,406) | (35,219) | |
Dividends paid to Company's shareholders | (33,971) | (19,287) | |
Interest paid | (2,975) | (4,665) | |
Net cash used in financing activities | (154,555) | (74,934) | |
Net change in cash and cash equivalents | (51,807) | 107,602 | |
Cash and cash equivalents at the beginning of the year | 206,512 | 98,520 | |
Exchange gain on cash and cash equivalents | − | 390 | |
Cash and cash equivalents at the end of the year | 154,705 | 206,512 | |
The following tables show the Company's realised sales prices adjusted for oil and oil products transportation and other expenses for the year ended December 31, 2012 and 2011.
2012 | |||
(US$/bbl) | UAS | CPC | Domestic |
Benchmark end-market quote | 111,70 | 111,70 | - |
Sales price | 108,80 | 109,83 | 34,50 |
Quality bank | - | (7,41) | - |
Premium of bbl difference | 0,14 | 8,76 | - |
Realised price | 108,94 | 111,18 | 34,50 |
Rent tax | (23,79) | (23,23) | - |
Export customs duty | (5,62) | (4,91) | - |
Transportation | (7,91) | (6,96) | (1,00) |
Sales commissions | (0,02) | (0,02) | - |
Adjusted realised price | 71,60 | 76,06 | 33,50 |
| |||
2011 | |||
(US$/bbl) | UAS | CPC | Domestic |
Benchmark end-market quote5 | 111,26 | 111,26 | - |
Sales price | 106,06 | 109,98 | 26,28
|
Quality bank | - | -8,88 | - |
Premium of bbl difference | -0,08 | 9,32 | - |
Realised price6 | 105,98 | 110,42 | 26,28
|
Rental tax | -23,73 | -24,07 | - |
Export customs duty | -4,98 | -5,13 | - |
Transportation | -7,76 | -6,97 | - 1,38
|
Sales commissions | -0,07 | -0,07 | - |
Adjusted realised price | 69,44 | 74,18 | 24,90
|
| Reference information | 2012 | 2011 |
| |
| Average exchange US$/KZT rate | 149,11 | 146,62 |
| |
| End of period US$/KZT rate | 150,74 | 148,40 |
| |
Coefficient barrels to tonnes for KMG EP crude | 7,36 | ||||
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 and gas producers. Overall production in 2012 was 12.2mt (an average of 247 kbopd) of crude oil, including the Company's share in Kazgermunai, CCEL and PKI. The total volume of proved and probable reserves, as at the end of 2011 was 226mt (1.7bn bbl), including shares in the associates of about 2.1 bn barrels. The Company's shares are listed on the Kazakhstan Stock Exchange and its GDRs are listed on The London Stock Exchange. The Company raised over US$2bn in its IPO in September 2006. International rating agency Standard & Poor's (S&P) confirmed KMG EP's "BBB-" corporate credit rating in December 2011.
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 7915)
Zhanna Oyshybaeva
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.
Related Shares:
Kazmunaigaz Exploration