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NC KMG 1H2016 performance results

31.08.2016

JSC National Company KazMunaiGas (“NC KMG”, or “the Company”) announces its operating and financial results for the first six months of 2016.

Production of crude oil and gas condensate

In the first six months of 2016, the consolidated volume of oil and gas condensate production across the NC KMG group of companies amounted to 11,325 thousand tonnes, which is 0.4% less than in the same period of 2015.

JSC KazMunaiGas Exploration Production produced 6,083 thousand tonnes of oil, which is 0.6% less than in the first six months of 2015.

Tengizchevroil LLP, taking into account NC KMG’s share (20%) produced 2,878 thousand tonnes of oil, or 2% more than in the first six months of 2015.

JSC Mangistaumunaigas, taking into account NC KMG’s share (50%) produced 1,564 thousand tonnes of oil, or 1% more than in the first six months of 2015.

KMG Karachaganak LLP produced 485 thousand tonnes of oil or 10% less than in the same period of 2015, due to planned preventative maintenance works in 2016.

Kazakhoil Aktobe LLP, taking into account NC KMG’s share (50%) produced 196 thousand tonnes of oil in line with the 2016 plan, which is 11% less than in the same period of 2015.

Kazakhturkmunai LLP produced 110 thousand tonnes of oil or 9% less than in the same period of 2015, due to well shut-downs for technical reasons. Work is currently underway to bring well production back to its previous level.

JSC KazTransGas produced 10 thousand tonnes, or 17% more than in the same period of 2015 due to the commissioning of new wells in the Amangeldy field and the adjustment of production volumes on Zharkum field.

Gas production

In the first six months of 2016, consolidated production of natural gas across the NC KMG group of companies amounted to 2,385 Mcm, which 3% less than in the same period of 2015.

JSC KazMunaiGas Exploration Production (Kazakh Gas Refinery LLP) produced 154 Mcm, which is 9% less than in the same period of 2015 due to the natural decrease in production as the field is in the final stage of development.

Tengizchevroil LLP, taking into account NC KMG’s share (20%) produced 898 Mcm.

JSC Mangistaumunaigas, taking into account NC KMG’s share (50%) produced 107 Mcm, which is 6% more compared to the same period of 2015 due to the increase in its own needs associated with the commissioning of the “Kalamkas” gas turbine power plant.

KMG Karachaganak LLP produced 830 Mcm or 9% less than in the same period of 2015. The difference is due to planned preventative maintenance works in 2016.

Kazakhoil Aktobe LLP, taking into account NC KMG’s share (50%) produced 155 Mcm, 5% less than in the same period of 2015, due to decreased production levels.

Kazakhturkmunai LLP produced 80 Mcm or 12% more than in the same period of 2015, due to the commissioning of Zapadnyi Elemes-94 from the 2nd quarter of 2015.

JSC KazTransGas (Amangeldygas LLP) produced 161 Mcm or 10% more compared to the same period of 2015 due to the commissioning of new wells on Amangeldy field and the adjustment of the production level of the Zharkum field.

Oil and gas transportation

In the first six months of 2016, the volume of oil transported through pipelines amounted to 28,278 thousand tonnes. The volume of oil transported by JSC KazTransOil pipelines was 21,923 thousand tonnes, while 3,613 thousand tonnes were transported by Kazakhstan-China Pipeline LLP. Oil transported by ship amounted to 3,383 thousand tonnes.

The volume of gas transported through pipelines in the reporting period was 44,885 Mcm, including international gas transit of 30,330 Mcm. The volume of gas sales for export amounted to 6,301 Mcm, while domestic transportation amounted to 8,261 Mcm.

Refining and Marketing

In the first six months of 2016, the volume of processed raw materials was 8,168 thousand tonnes, including 2,098 thousand tonnes from the Atyrau refinery, 2,342 thousand tonnes from the Pavlodar refinery, 1,182 thousand tonnes from the Shymkent refinery (taking into account NC KMG’s 50% share), 2,468 thousand tonnes from KazMunayGas International NV, and 78 thousand tonnes of raw materials from Caspi Bitum (taking into account NC KMG’s 50% share).

Currently, modernization and reconstruction works are underway at three refineries. Work is on schedule, with the first stage of modernization in completion phase, reconstruction of the equipment has been completed, and new facilities are coming online. Modernization works are expected to complete in 2017.

Completion of the modernization programme at three refineries will allow an increase in processing volumes from 12.1 million tonnes (2015 actual taking into account NC KMG’s 50% share in Shymkent refinery and Caspi Bitum) to 14.0 million tonnes of oil per year (2018 plan taking into account NC KMG’s 50% share in Shymkent refinery and Caspi Bitum). The quality of motor fuels will meet K4 and K5 environmental standards in accordance with the requirements of the Custom Union.

Financial results

Operating income in the first half of 2016 amounted to 1,508 billion tenge1 (4.4 billion USD2). Operating expenses for the six months of 2016 amounted to 1,321 billion tenge (3.8 billion USD). Net profit amounted to 81,707 million tenge (239 million USD).

Taxes and other mandatory payments to the budget taking into account core subsidiaries were 204,199 million tenge (590 million USD), 2% less than in the same period of 2015.

Capital expenditures for the first six months of 2016 amounted to 267,339 million tenge (772 million USD), an increase of 29% compared with the same period of 2015. This includes 176,574 million tenge (510 million USD) of investment project costs, 88 528 million tenge (255 million USD) on maintenance of production assets, and other expenses.

Commenting on the 1H16 results, NC KMG President (Chairman of the Management Board) Sauat Mynbayev said:

“Results of the first half of the year show that the Company is fulfilling its targets for 2016 in accordance with the NC KMG Development Strategy. At the same time, we see opportunities to improve operational efficiency, in particular by reducing costs and optimizing production in the Upstream sector. Currently, the subsidiaries of NC KMG are in the process of implementing the recommendations of the KMG Scientific and Research Institute (“SRI”) to enhance oil recovery, increase the overhaul life and improve well performance. Assuming the continuation of current market conditions and the effective implementation of production programs recommended by the SRI, we look forward to positive results for the year, even on our mature assets.”

1 For readers’ convenience sake, the operating income and operating expenses include the figures of KMG International N.V., being classified in consolidated financial report as part of terminated activity.

2 The amounts have been converted into US dollars for the reader's convenience at the average exchange rate over the corresponding period (the average rates over the 6 months of 2016 and 6 months of 2015 amounted to 346.11 and 185.25 tenge/USD, respectively).

Note: NC KMG is Kazakhstan's national operator for exploration, production, refining and transportation of hydrocarbons. 90% of the Company’s shares are owned by JSC Sovereign Wealth Fund "Samruk-Kazyna", and 10% are owned by National Bank of the Republic of Kazakhstan.

JSC NC KazMunayGas

JSC National Company KazMunaiGas (“NC KMG”, or “the Company”) announces its operating and financial results for the first six months of 2016.

Production of crude oil and gas condensate

In the first six months of 2016, the consolidated volume of oil and gas condensate production across the NC KMG group of companies amounted to 11,325 thousand tonnes, which is 0.4% less than in the same period of 2015.

JSC KazMunaiGas Exploration Production produced 6,083 thousand tonnes of oil, which is 0.6% less than in the first six months of 2015.

Tengizchevroil LLP, taking into account NC KMG’s share (20%) produced 2,878 thousand tonnes of oil, or 2% more than in the first six months of 2015.

JSC Mangistaumunaigas, taking into account NC KMG’s share (50%) produced 1,564 thousand tonnes of oil, or 1% more than in the first six months of 2015.

KMG Karachaganak LLP produced 485 thousand tonnes of oil or 10% less than in the same period of 2015, due to planned preventative maintenance works in 2016.

Kazakhoil Aktobe LLP, taking into account NC KMG’s share (50%) produced 196 thousand tonnes of oil in line with the 2016 plan, which is 11% less than in the same period of 2015.

Kazakhturkmunai LLP produced 110 thousand tonnes of oil or 9% less than in the same period of 2015, due to well shut-downs for technical reasons. Work is currently underway to bring well production back to its previous level.

JSC KazTransGas produced 10 thousand tonnes, or 17% more than in the same period of 2015 due to the commissioning of new wells in the Amangeldy field and the adjustment of production volumes on Zharkum field.

Gas production

In the first six months of 2016, consolidated production of natural gas across the NC KMG group of companies amounted to 2,385 Mcm, which 3% less than in the same period of 2015.

JSC KazMunaiGas Exploration Production (Kazakh Gas Refinery LLP) produced 154 Mcm, which is 9% less than in the same period of 2015 due to the natural decrease in production as the field is in the final stage of development.

Tengizchevroil LLP, taking into account NC KMG’s share (20%) produced 898 Mcm.

JSC Mangistaumunaigas, taking into account NC KMG’s share (50%) produced 107 Mcm, which is 6% more compared to the same period of 2015 due to the increase in its own needs associated with the commissioning of the “Kalamkas” gas turbine power plant.

KMG Karachaganak LLP produced 830 Mcm or 9% less than in the same period of 2015. The difference is due to planned preventative maintenance works in 2016.

Kazakhoil Aktobe LLP, taking into account NC KMG’s share (50%) produced 155 Mcm, 5% less than in the same period of 2015, due to decreased production levels.

Kazakhturkmunai LLP produced 80 Mcm or 12% more than in the same period of 2015, due to the commissioning of Zapadnyi Elemes-94 from the 2nd quarter of 2015.

JSC KazTransGas (Amangeldygas LLP) produced 161 Mcm or 10% more compared to the same period of 2015 due to the commissioning of new wells on Amangeldy field and the adjustment of the production level of the Zharkum field.

Oil and gas transportation

In the first six months of 2016, the volume of oil transported through pipelines amounted to 28,278 thousand tonnes. The volume of oil transported by JSC KazTransOil pipelines was 21,923 thousand tonnes, while 3,613 thousand tonnes were transported by Kazakhstan-China Pipeline LLP. Oil transported by ship amounted to 3,383 thousand tonnes.

The volume of gas transported through pipelines in the reporting period was 44,885 Mcm, including international gas transit of 30,330 Mcm. The volume of gas sales for export amounted to 6,301 Mcm, while domestic transportation amounted to 8,261 Mcm.

Refining and Marketing

In the first six months of 2016, the volume of processed raw materials was 8,168 thousand tonnes, including 2,098 thousand tonnes from the Atyrau refinery, 2,342 thousand tonnes from the Pavlodar refinery, 1,182 thousand tonnes from the Shymkent refinery (taking into account NC KMG’s 50% share), 2,468 thousand tonnes from KazMunayGas International NV, and 78 thousand tonnes of raw materials from Caspi Bitum (taking into account NC KMG’s 50% share).

Currently, modernization and reconstruction works are underway at three refineries. Work is on schedule, with the first stage of modernization in completion phase, reconstruction of the equipment has been completed, and new facilities are coming online. Modernization works are expected to complete in 2017.

Completion of the modernization programme at three refineries will allow an increase in processing volumes from 12.1 million tonnes (2015 actual taking into account NC KMG’s 50% share in Shymkent refinery and Caspi Bitum) to 14.0 million tonnes of oil per year (2018 plan taking into account NC KMG’s 50% share in Shymkent refinery and Caspi Bitum). The quality of motor fuels will meet K4 and K5 environmental standards in accordance with the requirements of the Custom Union.

Financial results

Operating income in the first half of 2016 amounted to 1,508 billion tenge1 (4.4 billion USD2). Operating expenses for the six months of 2016 amounted to 1,321 billion tenge (3.8 billion USD). Net profit amounted to 81,707 million tenge (239 million USD).

Taxes and other mandatory payments to the budget taking into account core subsidiaries were 204,199 million tenge (590 million USD), 2% less than in the same period of 2015.

Capital expenditures for the first six months of 2016 amounted to 267,339 million tenge (772 million USD), an increase of 29% compared with the same period of 2015. This includes 176,574 million tenge (510 million USD) of investment project costs, 88 528 million tenge (255 million USD) on maintenance of production assets, and other expenses.

Commenting on the 1H16 results, NC KMG President (Chairman of the Management Board) Sauat Mynbayev said:

“Results of the first half of the year show that the Company is fulfilling its targets for 2016 in accordance with the NC KMG Development Strategy. At the same time, we see opportunities to improve operational efficiency, in particular by reducing costs and optimizing production in the Upstream sector. Currently, the subsidiaries of NC KMG are in the process of implementing the recommendations of the KMG Scientific and Research Institute (“SRI”) to enhance oil recovery, increase the overhaul life and improve well performance. Assuming the continuation of current market conditions and the effective implementation of production programs recommended by the SRI, we look forward to positive results for the year, even on our mature assets.”

1 For readers’ convenience sake, the operating income and operating expenses include the figures of KMG International N.V., being classified in consolidated financial report as part of terminated activity.

2 The amounts have been converted into US dollars for the reader's convenience at the average exchange rate over the corresponding period (the average rates over the 6 months of 2016 and 6 months of 2015 amounted to 346.11 and 185.25 tenge/USD, respectively).

Note: NC KMG is Kazakhstan's national operator for exploration, production, refining and transportation of hydrocarbons. 90% of the Company’s shares are owned by JSC Sovereign Wealth Fund "Samruk-Kazyna", and 10% are owned by National Bank of the Republic of Kazakhstan.
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