KMG EP, NC KMG Take Steps to Implement Joint Policy
OREANDA-NEWS. July 16, 2010. The Board of Directors of JSC KazMunaiGas Exploration Production ("KMG EP" or the "Company") and NC KazMunayGas JSC ("NC KMG") are pleased to update the market on a series of transactions between KMG EP and NC KMG, reported the press-centre of KASE.
Acquisitions
KMG EP has reached an agreement with NC KMG to acquire 50% of Kazakhoil Aktobe LLP ("KOA"), 51% of Kazakturkmunai Ltd ("KTM") and 50% of Mangistau Investments B.V. ("MIBV"), the owner of 100% of the common share capital of JSC "Mangistaumunaigas" ("MMG").
For the three assets KMG EP will pay total cash consideration of USD750 million, of which US\\$350m is for the stake in Kazakhoil Aktobe ("KOA"), USD70m for the stake in Kazakturkmunai ("KTM"), and USD330m for a 50% stake in Mangistau Investments B.V ("MIBV"). The cash component of acquisitions will be financed by the Company's own funds. The ensuing total net debt corresponding to the stakes being acquired is USD1,499m, of which USD116m is KOA's net debt, USD53m is KTM's net debt and USD1,330m is MIBV's consolidated net debt .
According to preliminary estimates, these acquisitions will result in over 27% growth in consolidated oil production of KMG EP and in an increase of 406m barrels in 2P reserves (18.5%).
Kenzhebek Ibrashev, the CEO of KMG EP, said: "The acquisition of the stakes in Kazakhoil Aktobe, Kazakturkmunai and Mangistaumunaigas is a key element of our growth strategy and it further emphasises KMG EP's role as an asset consolidator in Kazakhstan. These acquisitions offer a considerable increase in production and reserves and will also expand the geography of our operations in Kazakhstan".
The acquisitions represent related-party transactions and as such were unanimously approved by the independent non-executive directors of the Board of KMG EP. The Board of Directors of NC KMG also approved the transactions.
The Board of Directors of KMG EP has received opinions from both Credit Suisse and Visor Capital that the consideration to be paid by the Company in the acquisition of a stake in MMG is fair to KMG EP from the financial point of view. This transaction, subject to a number of conditions including approval by regulatory bodies, is expected to be completed in Q3 2010.
The Board of Directors of KMG EP has also received an opinion from Deutsche Bank that the consideration to be paid by the Company in the acquisition of the stakes in KOA and KTM is fair to KMG EP from the financial point of view. This transaction is subject to a number of conditions, including approval by regulatory bodies and, pursuant to Kazakhstan's law, a written waiver signed by the remaining shareholders of KOA and KTM of their pre-emptive right and expected to be completed in Q4 2010.
NC KMG also confirms that it is considering to transfer a number of new exploration blocks to KMG EP later this year.
Treasury Policy
In line with the Company's Treasury Policy, the Board of Directors of KMG EP has reviewed its arrangements for depositing the Company's cash resources in order to broaden the number of its counterparties, to spread risk, and to diversify and enhance credit exposure (See notes to editors).
NC KMG Bond
KMG EP and NC KMG announced today that KMG EP intends to purchase 220 bn Tenge (USD1.5bn) three year Bond to be issued by NC KMG ("the Bond").
Transaction Highlights
- The Bond value is 220 bn Tenge or USD1.5 bn
- The Bond which were issued on 25 June 2010 will carry an annual coupon of 7% and mature in three years
- The deal will enable, above certain thresholds, KMG EP to offset the Bond against future acquisitions of assets from NC KMG
- The deal will require NC KMG to offset future dividends from KMG EP against outstanding Bond
- The transaction will diversify and enhance credit exposure and spread risk
* Financial indicators are as of September 30, 2009
** As of December 31, 2009 total outstanding non-recourse loan of MIBV was
USD2,771 m. the loan was provided to MIBV in 2009 at LIBOR +3,5%
Ends
The full version of the press release is available at the KASE website at:
- http://www.kase.kz/files/emitters/KMGZ/kmgz_reliz_120710.pdf - in Russian;
- http://www.kase.kz/files/emitters/KMGZ/kmgz_reliz_120710_e.pdf - in English.
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