Rating of oil producing companies in Kazakhstan
December 1, 2020
Contents
› Key events in the oil and gas market in the world
› Key events in the energy sector of the Republic of Kazakhstan
› Rating of oil producing companies in Kazakhstan
Rating of oil producing companies of Kazakhstan consists of 7 indicators and includes 15 oil producing companies, based on publicly available information
The rating represents the opinion of CSI consultants on assessment of business efficiency in terms of financial and operational indicators, as well as identification of market leaders
Rating calculation methodology
Specific values per ton of oil produced are calculated for all indicators except for the production volume itself and ROACE
The results for each indicator are ranked according to the following principle:
-"higher better": production volume, revenues, net profit, capital investment, free cash flow and ROACE
-"lower better": production costs
Selection of companies
The selected companies represent 66% of Kazakhstan's total oil and condensate production in 2019 (58.8 and 90.5 million tons respectively)
Most of the country's oil and condensate is produced by three major operators: TCO, NCOC and KPO. Only TCO publishes its annual financial statements. NCOC and KPO are not included in the rating due to lack of publicly available information (except for production volume and revenues)
Sources of information
-Audited financial statements from the Internet resource Depository of Financial Statements for Public Interest Organizations of Kazakhstan
-Annual reports of companies and related organizations
-Data from official websites of companies and Internet resource of Kazakhstan Stock Exchange (KASE)
South-Oil LLP and Zhaikmunai LLP were included in CSI Energy Outlook 2019 edition rating.
In the 2020 edition, they were excluded from the rating: due to the absence of audited financial statements for 2019 in the Depository of Financial Statements (South-Oil, as of 13.09.2020), and after reviewing comparability for the rating (Zhaikmunai)
PetroKazakhstan Kumkol Resources JSC owns 50% of the capital of Kazgermunai JV LLP, but is represented separately in the rating
According to the rating results 3 companies have improved their performance since 2018
The first place, as in 2018, remains with TCO. After TCO, in the second place comes Caspi neft. OMG closes the top three
The most significant growth in 2019 was for OMG, which increased its performance by 19 points compared to 2018. Kazpetrol Group also improved its performance by 18 points
The ratings of Sazankurak and Turgai-Petroleum changed insignificantly with a small decline
The positions of CNPC-AMG and Kazakhturkmunai fell strongly in the rating as compared to 2018: by 21 and 26 points, respectively
Oil production volume
*companies are not included in the rating due to lack of publicly available information
On average, the production volume in 2019 increased by 3% compared to 2018 for the companies in the sample
For three consecutive years, the top three production leaders have included three major operators: TCO, NCOC and KPO
TCO, as in 2018, remained the industry leader in Kazakhstan with 218,368 thousand barrels
In 2019, NCOC completed capital repairs of land and offshore facilities. The successful completion of the project to convert wells on Island D and the upper structure project on EPC-4 Island allowed to significantly increase production volumes (by 9%)
Oil production in PetroKazakhstan KR decreased by 15% in 2019 according to the production plan. This was primarily due to a natural production decline
In many other companies there was an increase in production up to 10%, which was the result of constant increase in oil recovery factor, implementation of such methods as commissioning of new wells, hydraulic fracturing, well workover, completion and overhaul of formations and polymer flooding
Revenue per oil production
*the company is not included in the rating due to lack of publicly available information
TCO and NCOC maintained their top three positions in terms of revenue per barrel of oil produced in 2019 as they did in 2018. CNPC-AMG's position fell from 3rd to 5th place (taking into account NCOC)
In 2019, TCO embarked on developing digital solutions to improve security, better manage risks, improve workflow efficiency and increase revenues.
Similar to oil production, a 10% increase corresponds to the production plan, which was due to a continuous improvement in the operational efficiency of business processes
Production costs
Top-3 companies in 2018 for this indicator, TCO, PetroKazakhstan KR and Kazgermunai, maintained their positions in 2019
For most companies, 2019 was less economically efficient than 2018
Petro Kazakhstan KR spent 4.7% more on production costs in 2019 than in 2018.
This increase may be due to higher costs of implementing new technologies for automation, digitalization and improvement of production processes, as well as expanding the range of products
In general, the production costs of all companies remained at the same level compared to 2018, with a slight decrease of 1%
Net income
TCO moved up to 1st place in 2019. At the same time, the previous leader, Sazankurak, came down to 3rd place, losing 43% of profit. In turn, OMG increased its income by 2.6 times
In 2019, according to the government decree, for the following three years OMG received a preferential rate on mineral extraction tax at a separate part of the Uzen field, which led to a sharp increase in net income per barrel of oil produced. This change has temporary effect
CAPEX
The first three leaders of 2018 maintained their positions in 2019, while increasing capital investments by 4-13%
TCO accounted for the largest capital investment of $45.2 per barrel of oil produced. In 2019, TCO continued its investments in the Future Growth Project and the Wellhead Pressure Management Project. Also in September 2019, TCO completed a major maintenance and repair work, which was the largest and most significant overhaul in TCO's history, partially resulting in higher costs
Free cash flow*
* Free cash flow = Cash from operating activities − Capital costs
Leaders of the indicator for 2018 (Caspi neft, CNPC-AMG and Kazgermunai), fell to the middle of the rating, while the first place went to Sazankurak with a sharp increase by 3.4 times
Despite a 2.6 times increase in net income, free cash flow of OMG remains at the same level
ROACE*
*ROACE = (Net income + Income tax + Financial expenses) / (Average assets − Current liabilities)
Caspi neft was the leader among all companies in 2019, which has increased
its indicator by 2.5 times
The previous leader, Kazgermunai, shifted to the 2nd place with 129%, which is almost
a third lower than in 2018
Kazakhoil Aktobe and MMG, despite their strong performance in 2018, were in the middle of the rating in 2019
This rating is for informational purposes only. The rating and its description are not a recommendation to buy, hold until maturity or sell any securities or make any investment decisions and are not a call for any action.
Any statement, estimate or forecast included in CSI Energy Outlook regarding the expected future results may not be accurate, and therefore should not be relied upon as an obligation or assurance regarding future results. CSI does not assume any obligation or liability with respect to the recipient or any other person for damage or loss of any kind resulting from the use or erroneous use of this document or its part by the recipient or other person; does not accept and does not assume any future obligations to update the document or its part or to clarify or notify any person
about inaccuracies contained in the document or its part that may be revealed.
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Contents
› Key events in the oil and gas market in the world
› Key events in the energy sector of the Republic of Kazakhstan
› Rating of oil producing companies in Kazakhstan