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    KMG Profits Plunge on Weak Prices, Opec+ Cuts


Kazakhstan's national oil company saw core earnings halve and net income almost evaporate on low prices and Opec+ cuts.

by: Joe Murphy

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KMG Profits Plunge on Weak Prices, Opec+ Cuts

Core earnings (Ebitda) at Kazakhstan's national oil company KazMunayGas (KMG) slumped 47% year on year in the first half to tenge 552bn ($1.36bn), its results published on August 27 show.

Kazakhstan's biggest oil producer sold its crude for 39% less in the period at $40/barrel, it said, while oil and gas condensate production fell 3.1% to 11.35mn mt, largely owing to Opec+ cuts that Kazakhstan started enforcing in May. Gas output grew 3.9% to 4.32bn m3, however.

Net profits came to only tenge 21bn, down from tenge 622bn a year earlier, as KMG booked tenge 225bn in impairment charges, including tenge 159bn at its Romania-based subsidiary KMG International. Free cash flow was negative tenge 5bn, versus tenge 141bn positive in the first half of 2019.

KMG's gross debt also edged up 3.4% to tenge 3.97bn, in part due to devaluation of Kazakhstan's currency, although this factor also cushioned the blow of low prices to its revenues.

The bulk of KMG's production and revenues comes from the Kashagan, Karachaganak and Tengiz projects where it is partnered with international majors. It also owns Kazakhstan's oil and gas pipelines, refineries and many of its filling stations.

KMG began shipping gas to China in October 2017 and revenues from these sales have been a key driver of growth in recent years. They were down only 3.6% in the first half at tenge 328bn, providing a source of stability amid the significant fall in KMG's oil revenues.