2017
milestones

2017 milestones
Q1
  • Independent consultants DeGolyer and MacNaughton assessed the Company’s liquid hydrocarbon reserves as of 31 December 2016. They concluded that KMG EP’s proved and probable reserves (2P) of liquid hydrocarbons, excluding its shares in Kazgermunai (KGM), CCEL (Karazhanbasmunai) and PetroKazakhstan Inc. (PKI), amounted to 145 million tonnes (1,061 million barrels), which is 4% less than estimated at the end of 2015. The proved reserves of (1P) liquid hydrocarbons were 93 million tonnes (684 million barrels), and proved, probable and possible reserves (3P) were 196 million tonnes (1,433 million barrels).
  • The Company won the appeal of its tax audit for 2009-2012. The State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan reduced the original amount of its tax claim on the Сompany by 25 billion tenge to 13.5 billion tenge.
  • In the first three months of 2017, KMG EP’s total production, including its shares in KGM, CCEL and PKI, amounted to 2,904 thousand tonnes of crude oil (238 kbpd), down 5% on the same period in 2016.
  • Revenues in the first three months of 2017 totalled 214 billion tenge (US$ 663 million), up 76% on the same period in 2016. Net profit was 2.3 billion tenge (US$ 7 million), net cash was 1,143 billion tenge (US$ 3.6 billion) as of 31 March 2017 and capital expenditures amounted to 18 billion tenge (US$ 55 million) in the first three months, 37% less than in the first quarter of 2016.
Q2
  • The new Board of Directors was elected for a term of one year, till 23 May 2018 inclusive. The Board of Directors included three new members. Dauren Karabayev and Ardak Mukushov, as representatives of NC KazMunayGas, replaced Serik Abdenov and Assiya Syrgabekova, while Francis Sommer was elected as an Independent Non-Executive Director, replacing Edward Walsh. At the meeting of the Board of Directors, Igor Goncharov, Senior Vice President for Oil and Gas Production at NC KMG, was again elected as Chairman of the Board of Directors of KMG EP.
  • The Annual General Meeting of shareholders (AGM) voted to pay dividends on shares (ordinary and preferred) based on the results of 2016 in the amount of 289 tenge per share (including taxes withheld under Kazakhstan law). The total amount of dividends paid was about 19.8 billion tenge (US$ 63 million), or 15% of the consolidated net profit of the Company for 2016.
  • KMG EP acquired 49% of the shares in KS EP Investments BV, which owns 100% of Karpovskiy Severniy LLP, from MOL Hungarian Oil and Gas Plc for US$ 1 (one US dollar) as part of a prior sale and repurchase agreement. The purchase makes it the sole shareholder of KS EP Investments BV, with a 100% stake. All necessary regulatory approvals have been received. The Company exercised its priority right to purchase the stake in accordance with the Shareholders’ Agreement.
  • Changes were made to the composition of the Company’s Management Board. The Board of Directors appointed Kuanyshbay Nurgaliyev, Managing Director for Operations and Field Development, and Bekmurat Naizabekov, Managing Director for Marketing, Purchase and Sales of Oil. They replaced Dauletzhan Khassanov and Kairbek Yeleussinov.
  • In the first half of 2017, consolidated production, including the Company’s shares in KGM, CCEL and PKI, amounted to 5,885 thousand tonnes of crude oil (240 kbpd), 3% less than in the same period of 2016. Sales of refined oil products in the first six months under the new independent processing scheme amounted to 1,282 thousand tonnes.
  • The Company’s revenue for the first six months of 2017 was 437 billion tenge (US$ 1,371 million), which was 39% higher than in the same period the previous year. The increase in revenue was mainly due to the 30% rise in the price of Brent crude oil during the period, a higher share of exports and the Company’s adoption of the processing scheme from April 2016, which was partially offset by an 8% decrease in the average Tenge-US$ exchange rate. Net profit for the first six months of 2017 was 88 billion tenge (US$ 276 million), well above the 17 billion tenge (US$ 50 million) reported in the same period the prior year. Net cash as of 30 June 2017 was 1,286 billion tenge (US$ 4.0 billion), which is US$ 347 million higher than at the end of the first quarter of 2017.
Q3
  • In September, the Company held a regular meeting of the Board of Directors, at which the new Chairman of the Board was elected: Dauren Karabayev, Executive Vice President and Financial Director of NC KMG, replaced Igor Goncharov, who had left NC KMG.
  • KMG EP, including its stakes in KGM, CCEL and PKI, produced 8,884 thousand tonnes of crude oil (239 kbpd) in the first nine months of 2017, down 3% on the same period of 2016. In January-September 2017, KMG EP sold 1,774 thousand tonnes of oil products under the independent oil processing scheme.
  • Revenues for the first nine months of 2017 totalled 666 billion tenge (US$ 2,059 million), 29% higher than in the same period of 2016. Net profit for the first nine months of 2017 amounted to 168 billion tenge (US$ 521 million) and net cashflow from operating activities was 184 billion tenge (US$ 570 million). Net cash as of 30 September 2017 was 1,360 billion tenge (US$ 4.0 billion).
Q4
  • The Company held an Extraordinary General Meeting (EGM) of shareholders, at which Oleg Karpushin, Executive Vice-President for Production, Exploration and Oil Services at NC KMG, was elected to the Board of Directors of KMG EP to replace Igor Goncharov.
  • The Board of Directors approved the budget for 2018 and the business plan for 2018-2022. The 2018 budget is based on a forecast for Brent crude price of US$ 55 per barrel and an exchange rate of 340 tenge per US dollar. The total planned production volume at OMG and EMG in 2018 is 8.5 million tonnes (171 kbpd), 2% less than the production plan for 2017, mainly due to a decline in OMG’s base output in 2017. For 2018-2022, the Company expects free cashflow to be positive, mainly due to the positive effects of the independent processing scheme.
  • The Company announced its intention to repurchase its GDRs at a price of US$ 14 per unit, a premium of 23.7% on the weighted-average 30-day GDR price as of 1 December 2017 (US$ 11.32) and to delist from the London Stock Exchange (LSE) and the Kazakhstan Stock Exchange (KASE).
  • The Company’s GDRs were included in the official list of KASE to facilitate their repurchase from minority shareholders.
  • In 2017, KMG EP, including its stakes in KGM, CCEL and PKI, produced 11,868 thousand tonnes of oil (241 kbpd), 2% less than in 2016. Sales of oil products under the independent oil processing scheme, amounted to 2,388 thousand tonnes.
  • Revenues for 2017 increased 32% from 2016, amounting to 956 billion tenge (US$ 2,933 million3). Net profit for 2017 was 195 billion tenge (US$ 599 million) and net cashflow from operating activities was 218 billion tenge (US$ 667 million). Net cash as of 31 December 2017 was 1,339 billion tenge (US$ 4.0 billion), 167 billion tenge (US$ 512 million), or 14%, higher than on 31 December 2016.