CSI - Center for Strategic Initiatives
CSI - Center for Strategic Initiatives

The rating of oil and gas producing companies in Kazakhstan represents the opinion of CSI Group consultants regarding business performance in terms of financial and operational indicators, with the identification of market leaders.

Information sources

The rating is based on publicly available information, including annual reports of the companies and related organizations, audited financial statements (from the Internet resource of the Depository of financial statements for public interest organizations of Kazakhstan), data from the official websites of the companies, as well as the Kazakhstan stock website Exchange (KASE).

Selected companies

CSI approached the selection of oil and gas producing companies using the 80/20 principle: the selected companies represent 92.6% of Kazakhstan’s total oil and condensate production in 2018 (613.8 and 662.6 million barrels, respectively).

Thus, CSI consultants analyzed the financial and production indicators of the following 19 oil and gas companies for 2017-2018:

Most of the above companies are assets of JSC National Company KazMunayGas (NC KMG):

- Operating assets: MMG (50%), OMG (100%), PetroKazakhstan KR (33%), EMG (100%), Kazgermunai (50%), Karazhanbasmunai (50%), Kazakhoil Aktobe (50%), Kazakhturkmunai (100%);

- Non-operating assets: TCO (20%), NCOC (8.44%), KPO (10%).

NC KMG share in these companies represents 26.1% of the total oil production in Kazakhstan in 2018.

Difficulties in collecting information

When collecting information for the rating, we faced three types of difficulties. Problem with the availability of the latest data (for 2018) Most of the company reports were collected in the period July-early August 2019. The annual financial statements for 2017 were available for all resident companies included in the rating. The problem arose with the reporting for 2018. Only some oil and gas companies by this time uploaded the annual financial statements for the past year to the depository website.

When contacting a number of companies regarding the disclosure of information for 2018, they responded that the data would be available later. According to the Rules for the submission of financial statements to the depository, public interest organizations (including joint-stock companies, subsoil user organizations) should submit annual financial statements to the depositary no later than August 31 of the year following the reporting year. Thus, it was found that many companies submit their reports at the last moment, just before the established deadline.

No statements in open sources

The main part of oil and condensate in the country is extracted by three large operators: TCO, NCOC and KPO (together 58.1% of the total production). However, only TCO publishes annual financial statements. In this regard, CSI sent a letter to the Authority in the Production Sharing Agreements (PSA) for the North Caspian and Karachaganak projects (PSA LLP) with a request to assist in obtaining the financial statements of KPO and NCOC for 2017-2018 (including date on revenue). We have received a response that this information is confidential and should not be disclosed under the terms of the PSA. It should be noted that the Republic of Kazakhstan started the implementation of the Extractive Industries Transparency Initiative in 2005. This global standard helps ensure transparency and accountability in managing the country’s natural resources. In this regard, we hope that in the near future transparency issues in the financial performance of the largest oil and gas production projects’ operators in Kazakhstan will be fully resolved.

Lack of data on production and reserves in open sources

In addition to financial indicators, CSI consultants collected production indicators to compile the rating. When searching for information, we encountered a lack of production data for some companies that are not related to NC KMG. By the way, NC KMG provides data broken down by its assets on its website (11 of 19 companies in the sample are assets of NC KMG).

A more serious problem is the lack of company data on 2P reserves. Initially, we planned to make a rating taking into account these data. However, nowadays it is generally accepted in Kazakhstan to show reserves according to the old methodology. NC KMG in its annual report shows A, B, C1 reserves for its operating assets. Despite this, there are already good examples when companies declare their 1P, 2P, 3P reserves, such as Zhaikmunai and Caspi neft.

The rating was compiled for three groups of indicators:

Rating methodology

For the rating, we calculated all the indicators per production volume (per ton of oil), except for the oil production volume itself and ROACE. When preparing the rating, seven indicators mentioned above were included. The results for each indicator were ranked according to the principle:

-“the higher the better”: oil production volume, revenue, net income, CAPEX, Free Cash Flow and ROACE;

-“the lower the better”: production costs.

Despite the fact that 19 companies were included in the sample, there are no open operational and financial information for two operators (KPO and NCOC, for more details see page 48). Therefore, the maximum score for the best result is limited to 17. So, the points were assigned according to the ranking: 17 - the highest place, 1 - the lowest place. In the end, we calculated the sums of points for 2018 for each company. The company with the highest score takes the first place, in other words, the company is the leader in most of the seven indicators.

Further, in order to find out the changes in the rating, the results were ranked and the total points were calculated in the same way for 2017. Changes between two years were also shown in points.

This methodology was applied in order to compare not the size of the companies, but business performance and its dynamics.

Rating results

Rating of oil and gas producing companies in Kazakhstan

On average, oil production of the selected companies increased by 3% in 2018 compared to 2017 level. For two consecutive years, the leaders by production volume are three major operators in Kazakhstan: TCO, KPO and NCOC. TCO is a leader with 209,785 thousand barrels of oil produced.

The most significant increase compared to the previous period is 59% observed at NCOC, with 95,012 thousand barrels in 2018. KPO oil production has decreased by 3% to the level of 80,264 thousand barrels. There are also good results at Kazpetrol Group with an increase of 49% and Maten Petroleum with an increase of 23%.

The reverse situation is at Zhaikmunai with a decrease of 23% and in Kazakhoil Aktobe with a decrease of 16%. Sazankurak is in last place with oil production of 474 thousand barrels in 2018, which is 10% lower than the previous year. MMG, OMG and CNPC-AMG have almost the same production levels as in the previous period.

Zhaikmunai takes the first place with revenue of $103 per barrel of oil produced. Further, there is TCO with the level of $82 in the second position. The leader rating also includes CNPC-AMG with revenue of $63.

Kazpetrol Group showed a significant increase in revenue - by 34% compared to 2017, and also Kazakhturkmunai performed well - with an increase of 31%.

PetroKazakhstan KR is in the last place with revenue per production of $16 per barrel. The only negative change (-4%) was observed at Turgai-Petroleum.

TCO has the smallest unit production costs in the amount of $4.87 per barrel, however this is 12% higher compared to the previous period. Further in the rating, there are the companies of the Kyzylorda region, PetroKazakhstan KR with $6.41 and Kazgermunai with $7.94.

Compared to 2017, Kazakhoil Aktobe has significantly reduced its unit production cost by 33%. The remaining companies, in general, have a slight increase compared to the previous period.

The maximum unit production costs are at Zhaikmunai in the amount of $43.81, which is 20% higher than in 2017.

In terms of net income per production, the leader is TCO with $32.60 per barrel of oil produced, which is 40% higher than in 2017. Sazankurak’s net income is slightly lower – $31.67, with an increase of 68% compared to 2017. In the third place is CNPC-AMG with net profit of $12.73 per barrel.

Kazakhturkmunai has achieved the highest growth at the level of 1,079%, increasing net income from $1.04 per barrel to $12.29.

Zhaikmunai is the only company from the analyzed companies with negative net income in 2018.

The leader in CAPEX per oil production is Zhaikmunai with the amount of $68.19 per barrel of oil produced, which is 53% higher than in the previous period. The second place is occupied by TCO with CAPEX of $45.59 per barrel, which is 37% higher than in the previous period. The top-3 is closed by CNPC-AMG with the level of $14.13 per barrel.

PetroKazakhstan KR has the highest increase in capital costs compared with 2017 - 103%. Also, a significant increase of 57% has been observed at Turgai-Petroleum.

The lowest unit capital costs are at Kazakhoil Aktobe in the amount of $0.81 per barrel, which is 28% lower than in the previous period.

Caspi neft has the largest free cash flow in the amount of $18.52 per barrel, which is 48% higher than in 2017. The second place is occupied by CNPC-AMG with $17.68 per barrel, and the third place goes to Kazgermunai with $14.53 per barrel.

The highest increase in free cash flow per unit of production was recorded by Kazpetrol Group and Kazakhoil Aktobe, who ended 2018 with a positive cash inflow, whereas in 2017 it was negative. For the second year in a row, Zhaikmunai has negative cash flow, however, in 2018, the indicator reached the level of -$16.03 per barrel.

* Free Cash Flow = Cash from Operating Activities - Capital Costs

Caspi neft has the highest indicator of 111% among all companies. Kazgermunai is in the second position with ROACE level of 86%, which is 51% higher than in the previous period. MMG closes the top-3 with an indicator of 84%, thereby showing an increase of 39%, compared with 2017.

The lowest values in 2018 were at Zhaikmunai with -1%, Sazankurak with 17% and TurgaiPetroleum with 21%.

Currency leverage ratio and its impact on operating profit

All companies operating in the oil industry are quite dependent on world oil prices. In the case of vertically integrated companies, the effect is minimized due to the fact that lower oil prices negatively affect upstream revenues, but positively affect downstream costs, i.e. a change in oil prices may not be so harmful to the company as a whole.

Oil producers in the upstream sector also have a similar effect due to the currency structure of revenue and costs, which serves as a natural hedge of the company’s currency risks. Usually a decrease in oil prices is accompanied by a weakening of the tenge, which partially compensates for the negative impact of a decrease in oil prices on financial indicators, if the major part of operating and capital costs are denominated in tenge.

For demonstration of this effect, we decided to analyze the sensitivity of operating profit on changes in the exchange rate using the example of one of the largest Kazakhstan enterprises – JSC Embamunaigas (hereinafter EMG; included in the CSI rating of oil and gas producing companies). We calculated the currency leverage ratios of the Company for 2017 and 2018: the higher the ratio, the higher the benefit from weakening of tenge and vice versa.

In 2018, the currency share in EMG revenue amounted to 93.6%, and in expenses** - 2.4% (therefore, the share of local content in all operating expenses amounted to 97.6%). As a result, the EMG currency leverage ratio is 4.16, i.e. when the tenge depreciates by 1%, operating profit rises by 4.16%. For comparison, in 2017, the share of foreign currency in the Company’s revenue and expenses amounted to 93.4% and 4.2%, respectively. Thus, the currency leverage ratio in 2017 was 3.76. The increase in this indicator in 2018 is mainly due to higher oil prices. It is also worth noting that the high local content in EMG costs allows to protect the Company from the possible depreciation of tenge.

From an analytical point of view, there is a need to calculate the currency leverage ratio and compare the values for a number of oil companies. In this issue of CSI Energy Outlook, the ratio is calculated only for EMG, due to the availability of all the necessary information for calculations in open sources for this company. In the future release, if there is data on other companies, the currency leverage ratio may be included in the overall rating of oil and gas producing companies.

In general, by knowing the currency leverage ratio value, a company and potential investors, analysts can predict the impact of changes in the exchange rate on the operating profit of a company and draw appropriate conclusions and make certain decisions. For example, company management may begin to consider the use of financial instruments for currency hedging.


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 Group 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.

CSI Group materials cannot replace the knowledge, judgment, and experience of the users, their management, employees, consultants and (or) clients during the adoption of investment and other business decisions. CSI Group receives information from sources that are, in the company’s opinion, reliable, but CSI Group is not responsible for the accuracy of the information, i.e. does not audit or otherwise verify the data presented and is not responsible for their accuracy and completeness.
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