KazMunayGas purchases Samruk Kazyna’s share in Kashagan Company

The national oil company used a call option and paid $3.8 billion

On September 15, 2022, KazMunayGas (KMG), the national oil and gas company in Kazakhstan spent $3.8 billion on Samruk Kazyna’s share in KMG Kashagan B.V., according to the KMG website.

In fact, the company has used its call option for repurchasing the shares under the agreement signed in 2015.

«This is the biggest deal for KazMunayGas over the past several years. The increase of the KMG’s share in the Kashagan project will allow the company to improve its performance in terms of consolidated production, EBITDA, net revenue and assets. At the same time, the company’s debt is also going to increase. It is planned that we will cover the deal at the expense of cash flow generated by KMG Kashagan B.V.,» said Dauren Karabayev, deputy head of KMG.

In 2015, KMG sold 50% of KMG Kashagan B.V. to the National Welfare Fund Samruk-Kazyna. Back then the company was forced to sell in order to decrease its debt and avoid a breach of the company’s financial covenant «net debt / EBITDA <= 3.5х,» KMG said.

As a result, the total debt of KMG decreased from $19.2 billion as of the end of 2014 to $8.4 billion in the first half of 2022. Right after the 2015 deal with Samruk Kazyna, the company’s debt was about $10.7 billion.

On June 1, 2022, the oil production on Kashagan was stopped for 45 days due to planned maintenance. This is standard practice for the oil industry when the production cycle stopped once in several years.

It is expected that the North Caspian Operating Company (NCOC) will start preparing a basic design for the second phase of Kashagan this year. It might increase oil production in the field at least twofold.

The Kashagan oil field is one of the world’s largest and most complex offshore oil fields discovered during within the last few decades. The field reservoir is integrated hydrocarbons accumulation with 4.65 billion tons (36.6 billion barrels) of oil in place. Kashagan has been producing oil since 2016.

Among stakeholders of the NCOC, which runs the Kashagan field, are KMG Kashagan B.V. (16.877%), Shell Kazakhstan Development B.V. (16.807%), Total EP Kazakhstan (16.807%), AgipCaspian Sea B.V. (16.807%), ExxonMobil Kazakhstan Inc. (16.807%), CNPC Kazakhstan B.V. (8.333%) and Inpex NorthCaspian Sea Ltd. (7.563%).

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