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.
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).
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.
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 of oil and gas producing companies in Kazakhstan
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