Zhaikmunai posts EBITDA of US$ 32.5 mm in H1 2009; production up by 48.8 %.
Good progress in difficult trading environment
Douglas – September 1 2009 – Zhaikmunai L.P. (LSE: ZKM) (‘Zhaikmunai’), the independent oil and gas enterprise operating in northwestern Kazakhstan, today announces its interim results for the six months to 30 June 2009.
Operational highlights
– Average daily production increased to 7,271 barrels per day (1H08: 4,930 bbls per day)
– Increase in number of producing wells from 9 to 16
– Production volumes up by 48.8 per cent to 1,326,980 bbls (1H08: 892,000 bbls)
– End June 2009 daily oil production up to 6,967 bbls per day
– Completion of a residential building containing 90 flats in the city of Uralsk, part of the village relocation programme
Financial highlights
– Revenue down 41.9 per cent to US$44.7 million (1H08: US$76.9 million)
– EBITDA down to US$32.5 million (1H08: US$42.1 million)
– Net cash flows from operating activities down 27.1 per cent to US$13.8 (1H08: US$19.0 million)
– Net (loss)/ profit of US$(20.1) million (1H08: US$17.6 million) due to loss on hedge (US$15.4 million) and foreign exchange loss (US$12.6 million).
– Average realised oil price on domestic and export sales of US$31.32/bbl (1H08: US$91.92/bbl)
Key developments
– Obtained approvals from the ZKR (Central Committee of Field Development) of Zhaikmunai’ oil deposit and gas-condensate development plans, thereby putting all of Zhaikmunai’s reserves under approved development plans.
– Extension of Zhaikmunai’s gas flaring permit from 31 October 2009 to 30 June 2010
Post H1 update
– On 29 July 2009 Zhaikmunai announced its intention to raise US$300 million through the sale of new common units (the “Placing”). Zhaikmunai has signed an underwritten placing agreement with ING Bank, Mirabaud Securities, Renaissance Capital and First Energy Capital Corp. for a placing of US$180 million in common units to investors, and Claremont Holdings Limited, the current 90% owner of Zhaikmunai, has agreed to subscribe for US$120 million in common units, in each case subject to certain conditions including the waiver by the Republic of Kazakhstan of its statutory pre-emption rights.
– On 19 August 2009 the issuance of common units in connection with the Placing was approved at a special general meeting of Zhaikmunai’s limited partners.
– On 27 August 2009 Zhaikmunai signed an amendment agreement with BNP Paribas pursuant to which Zhaikmunai’s existing loan facility will be amended and the outstanding defaults under the facility will be waived, subject to the satisfaction of certain conditions including completion of the Placing.
– Zhaikmunai today also publishes the audit report relating to its year-end results for 2008 and 2007, re-issued by its auditors to clarify that the report covers the company’s consolidated results in respect of both financial years ended 31 December 2008 and 2007, respectively. The financial results of Zhaikmunai for these periods have not been restated or amended in any manner whatsoever. The re-issue and publication of the audit report is made solely to satisfy certain regulatory requirements applicable to the company.
Commenting on the results, Kai-Uwe Kessel, Chief Executive, said:
“Notwithstanding the much lower oil prices compared to last year, we had an encouraging first half thanks to the increase in production which resulted from the company’s successful drilling activities. Moreover, good progress has been made in the construction of the Gas Treatment Unit and other infrastructure associated with the Chinarevskoye field, notably the 90-apartment residential building in the city of Uralsk which is now complete. Good progress has also been made in securing additional equity financing with the announcement at the end of July of the US$300m Placing. We expect that the conditions will be met to complete the Placing during the month of September, providing the company with the financing necessary to implement its growth strategy.”
CHAIRMAN AND CHIEF EXECUTIVE’S REVIEW
Zhaikmunai has increased production, averaging 7,271 barrels per day during the first half of 2009 compared to 4,930 barrels per day during the first half of 2008. We now have 16 producing wells compared to 9 producing wells as at end June 2008.
In addition to increasing production, the partnership has also progressed its various construction projects. Notably the apartment building in Uralsk was completed, providing for a new home for 90 families participating in the village relocation program. Furthermore, in August, the tie-in to the Orenburg-Novopskov gas pipeline has been realised.
Revenues for the first half of 2009 were 41.9% lower than for the comparable period in 2008, directly related to the lower oil price. The average realised price for the first half of 2009 was US$31.32/bbl versus US91.92/bbl during the first half of 2008.
On 29 July 2009 Zhaikmunai announced its intention to raise US$300 million through the sale of new common units (the “Placing”). Zhaikmunai has signed an underwritten placing agreement with ING Bank, Mirabaud Securities, Renaissance Capital and First Energy Capital Corp. for a placing of US$180 million in common units to investors, and Claremont Holdings Limited, the current 90% owner of Zhaikmunai, has agreed to subscribe for US$120 million in common units, in each case subject to certain conditions including the waiver by the Republic of Kazakhstan of its statutory pre-emption rights. We expect that the Placing will be completed during September 2009.
At present Zhaikmunai is not in compliance with certain financial covenants under the BNP Paribas facility. As a result, although Zhaikmunai’s lenders have not requested early repayment of the loans under the BNP Paribas facility, under applicable accounting rules borrowings under such facility are classified as short-term debt. However, on 27 August 2009 Zhaikmunai signed an agreement with BNP Paribas to amend the facility and obtain a waiver for its defaults, with the grant of the waiver being subject to the satisfaction of certain conditions, including the completion of the Placing. Upon satisfaction of those conditions the company’s borrowings under the facility would be reclassified as long term debt.
FINANCIAL RESULTS
Revenue
Revenues from Oil Sales for the first 6 months of 2009 were $44.7 million, down 41.9% on the corresponding period (1H 08: $76.9 million). Sales volumes for the first 6 months of 2009 were 1,294,247 bbls, up 54.6% (1H08: 837,275 bbls) partly reflecting lower shipments in the second quarter of 2008 owing to temporary interruption in the supply of rail cars.
Net price received
The weighted average Brent crude oil price on which Zhaikmunai based its sales for the first 6 months of 2009 was US$51.62/bbl (1H08: US$105.55/bbl). The discount, accounting for the trader’s costs and fees, was US$15.40/bbl for the first 6 months of 2009 (1H08: US$13.63/bbl). Accordingly, the average netback for export crude oil sales on FOB Uralsk basis during the first 6 months of 2009 was US$36.22/bbl (1H08: US$91.92/bbl).
Capex
Total net cash used for capital expenditures for the first 6 months of 2009 amounted to US$24.9 million, as compared to US$90.8 million for the first 6 months of 2008.
Hedging contract
On 30 March the existing hedging contract pursuant to the terms of the facility agreement with BNP Paribas was sold and a new contract entered into. The sale of the hedge resulted in a realised loss of $14.7 million. Under the new contract, which ends 30 June 2010, the Company hedges a portion of its production with a floor of US$50.00/bbl. An unrealized loss of $6.1 million on the hedging contract has been recorded which stems from the fair market value of the Company’s hedging position as at 30 June 2009.
Foreign Exchange Loss
On 4 February Kazakhstan’s central bank devalued the tenge by 18 percent. The foreign exchange loss of US$12.6 million stems from the recalculation of monetary items like prepaid income tax, VAT receivable and advances paid.
OPERATIONAL REVIEW
Production
Production volumes increased 48.8 per cent for the first 6 months of 2009 to 1,326,980 barrels, compared to 892,000 barrels for the first 6 months of 2008. Daily crude oil production increased to 7,271 barrels per day during the first six months of 2009 in comparison to an average of 4,930 barrels per day in first half of 2008. At the end of June 2009, there were 16 producing wells, an increase from 9 producing wells at the end of June 2008. Oil production on 30 June 2009 was 6,967 barrels per day.
Drilling
In June 2009, Zhaikmunai employed 2 heavy drilling rigs (operated by Saipem and UNGG). After the completion of well 63 and 65 in February 2009, the Saipem rig started to drill well 119, which is now 90% completed. During the period under review, Zhaikmunai employed 2 work over rigs (operated by UNGG). Work over operations has been carried out for wells 27, 31,33.and 121.
Exploration
In relation to the work program, two Zhaikmunai projects have been reviewed on June 11, 2009 by the ZKR (Central Committee of Field Development):
The test production plan of the Mullinski oil accumulation in the Southern part of the Chinarevskoye field.
Test production project of the Tournasian oil accumulation in the Western part of the Chinarevskoye field.
Both projects were approved by ZKR on June 30, 2009. As such, the test production of well 32 started on June 18, 2009 and in well 33 (Tournasian West) test production has started in the beginning of July.
Engineering & construction
The construction work on the GTU has progressed further. The overall project is currently 50% complete. In addition to the GTU, the main other ongoing engineering & construction projects are:
– the gas pipeline (from the field to the Intergas Central Asia Gas pipeline),
– infield pipelines and roads, and
– construction of a reservoir pressure maintenance system
The construction of a residential building containing 90 flats in the city of Uralsk has been completed over the course of Q2 2009 and was officially commissioned in July 2009. The relocation of the village residents started on August 4, 2009 and will continue through Q3 2009.
FINANCIAL STATEMENTS
As from January 1, 2009, the Group has changed its functional currency from the Kazakhstani Tenge (“Tenge” or “KZT”) to the United States Dollar (the US Dollar or “US$”) as a result of increased purchases of materials and other costs from foreign suppliers which were denominated in US$. Moreover, the Group now has all of its financing in US Dollars.
The reviewed consolidated financial statements for the period through to 30 June 2009 are appended to this release.
The audit report published today for the year-end results for 2008 and 2007 is also appended to this release.
Here you can download the pdf-file from this press release.
CONFERENCE CALL
Zhaikmunai’s management team will be holding a conference call for analysts and investors to discuss this development at 2pm BST on 2 September 2009. Dial in details for the conference call and the replay facility, which will be available for one week, are below.
Participants International Dial In: +44 (0) 1452 561 371
Conference ID 27563465
Replay Details:
International Dial In: +44 (0) 1452 55 00 00
Replay Access Number: 27563465#
For further information please visit our website www.zhaikmunai.com or contact:
Zhaikmunai ir@nog.co.uk
Analysts/Investors
Frank Monstrey, Chairman +44 1624 682 179
Kai-Uwe Kessel, CEO
Jan-Ru Muller, CFO
Media
Brunswick Group LLP:
Michael Harrison +44 207 404 5959
Carole Cable
- Download
- Press Release
