KazMunaiGas Exploration Production reduces net profit by 13%
Almaty, March 1 2010
Interfax-Kazakhstan - JSC KazMunaiGas Exploration Production ("KMG EP", a subsidiary of KazMunaiGas) said in its consolidated financial statements for 2009 that its net profit for 2009 declined by 13% to 209.7 billion tenge.
"Profit after tax (net income) for the full year of 2009 was 209.7bn Tenge (US$1,422m) compared to 241.3bn Tenge (US$2,006m) in 2008 representing a 13% decline. This decline is attributable mainly to the decrease in revenue as a result of lower oil prices. This was partly offset by a foreign exchange gain of 89.5bn Tenge (pre-tax) (US$607m) that followed the devaluation of Tenge in February 2009. Excluding the foreign exchange gain net of tax, net income declined by 40% year on year," according to the company's statement.
Revenue for the full year of 2009 decreased by 20% to 485.5bn Tenge (US$3,291m) compared to 605.0bn Tenge (US$5,029m) in 2008. This was due to an 18% decrease in the average realized price per ton, from 64,879 Tenge (US$74.60 per bbl) to 53,082 Tenge (US$49.78 per bbl) and a 1% reduction in sales volume. In US Dollar terms, revenues declined by approximately 35% year on year.
In 2009 KMG EP recorded a 2.4bn Tenge (US$16m) loss from its share in Kazgermunai. This amount represents 50% of Kazgermunai's net profit of 33.8bn Tenge (US$229m) adjusted for 10.6bn Tenge (US$72m) from the effect of purchase price premium amortization, 4.3bn Tenge (US$29m) deferred income tax gross-up amortization and 4.4bn Tenge (US$30m) deferred income tax benefit revision. The financial results of Kazgermunai in 2009 were primarily affected by the lower oil price compared to 2008, introduction of the new tax code in 2009, accrual of 16.4bn Tenge (US$111m) related to environmental fines for excessive gas flaring and a change in the method of revenue recognition from the beginning of 2009, which has deferred sales by approximately 45-60 days.
In 2009 the Company received US$25m in dividends from Kazgermunai. From the date of the acquisition, dividends received have amounted to US$650m.
The Company has recognized the amount of 21.4bn Tenge (US$144m) as a receivable from CCEL, a jointly controlled entity, as at December 31, 2009. KMG EP has accrued 3.2bn Tenge (US$22m) of interest income for the full year of 2009 which is related to the US$26.87m annual priority return from CCEL.
Operating expenses were 330.6bn Tenge (US$2,241m) for the full year of 2009 compared to 297.2bn Tenge (US$2,470m) in 2008, representing an 11% increase. The key reasons for the increase were the introduction of the mineral extraction tax (MET), which replaced royalty, accrual of fines and penalties and the increase in payroll expenses. Excluding tax-related factors and accrued fines and penalties, operating expenses in 2009 increased by 4% in Tenge compared to 2008. This was primarily due to an increase in payroll expenses, change in crude oil balance, impairment of investment in joint venture, increase in energy tariffs and a loss on the disposal of fixed assets. This was partially offset by the reduction in depreciation expenses and decreases in costs of repairs, maintenance and materials. In US Dollar terms, operating expenses, excluding taxes, fines and penalties decreased by 15% year on year.
Operating cash flow for the full year of 2009 was 149.2bn Tenge (US$1,011m), which is 9% less than in 2008. The key reason for the decline was the decrease in oil price and the replacement of royalty by the MET.
Purchases of property, plant and equipment (capital expenditure, not including purchases of intangible assets, as per Cash Flow Statement) in 2009 were 43.3bn Tenge (US$294m) compared to 41.9bn Tenge (US$348m) in 2008, representing 3% increase. In US Dollar terms, capital expenditure declined by 16% year on year.
Borrowings and obligations increased by 117.2bn Tenge (US$759m) from 20.4bn Tenge (US$169m) as at 31 December 2008 to 137.7bn Tenge (US$928m) as at 31 December 2009. Increase in borrowings was mainly due to recognition of non-recourse debt and liabilities related to the acquisition of the 33% stake in PKI (as discussed above).
Net cash, cash equivalents and financial assets at 31 December 2009 amounted to 505.0bn Tenge (US$3.4bn) compared to 534.5bn Tenge (US$4.4bn) as at 31 December 2008.
As at December 31, 2009, 74% of cash and deposits with banks were denominated in USD and 26% were denominated in Tenge. Cash and deposits with two of the largest Kazakh banks, Halyk and Kazkommertsbank, account for approximately 75% of the financial assets as at 31 December 2009. Interest accrued on deposits with banks for the 2009 was 42.9bn Tenge (US$291m).
Dividends paid in 2009 were 46.1bn Tenge (US$313m) compared to 39.5bn Tenge (US$328m) paid in 2008.
Assets as of December 31, 2009 stood at 1,292,586,985,000 against 1,019,531,753,000 at the end of 2008, total equity rose to 1,000,779,149,000 in 2009 to 847,092,636,000 in 2008.
As a result of the tax audit covering the period of 2004 - 2005, the tax authorities assessed additional amounts of 32.0bn Tenge (US$213m) including principal of 16.2bn Tenge (US$107m) with the balance consisting of fines and penalties. The Company's management maintains that its interpretation of the tax legislation was correct," according to the press release
However, as the outcome of the dispute remains uncertain, the Company made appropriate provisions. As at 31 December 2009 the accrued provision was 11.4 bn Tenge (US$77m).
Consolidated production in 2009 was 11,497 thousand tons (232kbopd) of crude oil, including the Company's share in production from Kazgermunai and CCEL of 2,534 thousand tons (51kbopd).
Production in 2010 at Uzenmunaigas and Embamunaigas is expected to be 9,200 thousand tons (186 kbopd). Consolidated production in 2010 is expected to increase to 13.6 million tons including the 50% share in production of Kazgermunai and CCEL, as well as the 33% share in production of Petrokazakhstan Inc.
For the 2010 budget the Company based on the oil price of US$50 per barrel adhering to a conservative oil price scenario. This is in line with the government's macroeconomic forecast and the oil price assumption used by the Company's parent, National Company KazMunayGas.
In 2010 the Company is planning to spend about 95bn Tenge (US$633m) on capital expenditure, to primarily fund maintenance and exploration drilling, as well as the implementation of the associated gas utilization program.