H1 EBITDA up to US$ 43.35 MM (+33.10 % YoY)
London – September 6, 2010 – Zhaikmunai L.P. (LSE:ZKM) (‘Zhaikmunai’), the independent oil and gas enterprise operating in northwestern Kazakhstan, today announces its half-yearly results for the six months ended 30 June 2010.
2010 HALF-YEARLY RESULTS SUMMARY
All figures in US$ millions unless otherwise stated
|H1 2010||H1 2009||Change YoY|
|Revenues from oil sales||74.654||44.680||+67.08%|
|Net Cash Flow from operating activities||24.672||13.836||+78.32%|
|Net Cash Flow used in investing activities||(71.316)||(24.918)|
|Average Realised oil price (US$ per bbl)||77.85||51.62||+50.81%|
|Discount (US$ per bbl)||14.26||15.40||-7.40%|
|Weighted average netback (US$ per bbl)||63.59||36.22||+75.57%|
Zhaikmunai had a strong first half. All financial figures improved relative to the first half of 2009 reflecting a 50.8% increase in the average realised oil price. Oil production was practically unchanged. Production of condensate, LPG and dry sales gas is expected to commence before year-end, which will result in significant production growth.
KEY H1 2010 HIGHLIGHTS
EBITDA was US$43.35 million, 33% higher than EBITDA realized in H1 2009 (US$32.57 million).
Net profit was US$19.58 million compared with a loss of US$ 20.10 million during the same period last year.
Revenues increased to US$74.65 million, a 67% increase relative to the revenues realized in H1 2009 (US$44.68 million).
Successful test results for two new wells.
Completion of Zhaikmunai’s gas treatment facility is expected to occur before the end of September 2010
Strong oil prices enabled Zhaikmunai to realize revenue from oil sales of US$74.654 million. Revenues were also boosted by a 7.4% decrease in the discount for export sales that brought the weighted average netback prices to a level that was 75.57% higher compared with the level obtained during the first six months of 2009. This discount covers mainly transportation costs. Zhaikmunai’s marketing team was able to reduce these costs thanks to a more diversified client base and other cost savings.
Zhaikmunai continues to undertake hedging activities. Such hedging is part of the Company’s ongoing management of its business risk with the goal of protecting the availability of cash flows as provided under the terms of the Company’s syndicated loan facility led by BNP Paribas.
The previous hedging contract, with a floor price for Brent crude oil at US$50 per bbl and covering a portion of the Company’s oil export sales, expired on June 30, 2010. In March 2010 Zhaikmunai entered into a new hedging contract at zero cost and covering oil export sales of 4,000 barrels per day running from March 2010 through December 2010. Under the new hedging contract the floor price for Brent crude oil is fixed at a price of US$60 per bbl. The ceiling price is set at a range from US$89.25 per bbl to US$100 per bbl such that Zhaikmunai will receive all sales proceeds in excess of US$100 per bbl (*). The counterparties to the new hedging contract are BNP Paribas, Natixis and Raiffeisen Zentralbank.
On 30 June 2010 this hedging contract had a marked-to-market value of US$38,000; this was US$60,000 lower than the value at the beginning of the year due to the increase in oil prices. As this hedge does not qualify for hedge accounting, all gains and losses are taken directly to profit or loss.
Finance costs & debt
Finance costs were only US$654,000 in H1 2010 compared with US$3,498,000 during the same period last year. The reason for this is the full capitalisation of interest expenses on borrowings.
Total interest paid on the outstanding debt of US$381.677 million was US$16.458 million compared with US$8.526 million during the first half of 2009. In September 2009 the terms of the Company’s loan facility were changed bringing the interest rate from a level of Libor plus 3%, 4% and 5% for tranches one, two and three, respectively to a level of Libor plus 7% on all the outstanding debt.
The total outstanding principal balance of the liability under the loan facility as at 30 June 2010 was US$ 381,677 thousand, which is reduced by the amount of the facility arrangement fees of US$ 21,860 thousand (31 December 2009: US$ 381,677 thousand and US$ 25,329 thousand, respectively). The outstanding balance is repayable commencing September 30, 2011 in semi-annual instalments with the final payment being made on December 31, 2014. These figures are subject to further adjustment to reflect any changes to the borrowing base amount under the facility.
Zhaikmunai ended the first six months of 2010 with US$95.67 million of cash and cash equivalents, of which US$21.486 million is restricted cash. Almost all of this cash is held in US Dollar accounts.
|1H 2010||1H 2009||Change
|Average daily oil production (bopd)||7,261||7,271||-0.01%|
|Oil production (bbl)||1,314,256||1,316,051||-0.01%|
|Weighted Average Netback for crude oil sales||US$ 63.59/bbl||US$ 36.22/bbl||+75.57%|
Most of Zhaikmunai’s crude oil was delivered on a FCA (free carrier) Uralsk shipment basis and due to the high quality thereof, the discount to the market price of Brent crude oil is small. However, Zhaikmunai recently started to sell its crude oil on the basis of DAF (delivery at frontier) Solovey/Topoli terms in order to reduce its overall transportation costs.
As at 30 June 2010, inventory comprised 6.6% of the Company’s current assets compared to 4.5% as at 30 June 2009. Consequently, the volume of crude oil produced by the Company directly affects its revenues.
As at the end of the first half of 2010 there were 14 producing wells.
POST H1 UPDATE
– On 14 July 2010 Zhaikmunai announced successful test results for two more wells. Together with existing production, these wells will provide over 90% of the planned capacity of the gas treatment facility.
– On 25 August 2010, Zhaikmunai announced its first shipment of crude oil through the Black Sea port of Feodosia (Ukraine). A total of 233,444 bbl was transported by rail to Feodosia on a Free on Board sale (FOB-sale) where it was loaded on a tanker. As such the company has successfully tested a new destination that it can use for its future crude and condensate production.
– Construction of the Company’s gas treatment facility remains on schedule. Mechanical completion is expected before September 30th.
Kai-Uwe Kessel, Chief Executive Officer, commented:
“In the first half of 2010 we have continued to focus on completing the gas treatment facility. We worked intensively with our contractors – KSS and Exterran – to make sure this new milestone for the company will be reached before year-end. Our drilling program was focused on drilling the necessary wells to feed the plant. Our financial results in the first half were impressive with an EBITDA of US$43.35 million thanks to favorable oil prices. In the coming weeks we will reach the completion of the gas treatment facility and Zhaikmunai will enter into a new growth phase in which we will also produce condensate, LPG and dry sales gas.”
(*) Below US$60 Zhaikmunai will obtain a price of US$60; between US$60 and US$89.25; the Brent crude oil price is obtained; between US$89.25 and US$100 the price obtained will be US$89.25; and above US$100 the price will be US$89.25 plus the proceeds in excess of US$100.
For further information please visit www.zhaikmunai.com.
Zhaikmunai’s management team will give a presentation, followed by a Q&A session for analysts and investors on Monday 6 September 2010 at 2 pm GDT (=UK time).
Please confirm your attendance with Zhaikmunai’s Investor Relations Department on +44 1624 682179 or email on email@example.com.
|Telephone:||+ 44 (0) 1452 561 263|
Teleconference replay until Tuesday 14 September 2010 :
|International:||+ 44 (0) 1452 550 000 (access code: 98300876#)|
|UK Free Call:||0800 953 1533|
|USA Free Call:||1866 247 422|
Bert Jordens, Investor Relations Officer
+44 (0) 1624 68 21 79
+44 (0) 20 7404 59 59
Zhaikmunai is an independent oil and gas enterprise currently engaging in the exploration and development and production of oil and gas. It is listed on the London Stock Exchange (Ticker symbol: ZKM). Its principal producing asset is the Chinarevskoye Field located in northwestern Kazakhstan. Zhaikmunai L.L.P., a wholly-owned subsidiary of Zhaikmunai L.P., holds a 100% interest in and is the operator of the Production Sharing Agreement for the Chinarevskoye Field.
Some of the statements in this document are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of the Partnership or its officers with respect to various matters. When used in this document, the words “expects,” “believes,” “anticipates,” “plans,” “may,” “will,” “should” and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements.
- Zhaikmunai H1 2010