Kazakhstan’s Ministry of Finance doubles its stake in KMG by using National Fund’s money

On November 28, the Ministry of Finance of Kazakhstan acquired 51,625,495 common shares from KazMunayGas (KMG) for $1.1 billion or $23.17 per share. As a result, the ministry’s stake in the company has increased from 7.69% to 16.15%, KMG said in a statement.

In turn, Samruk Kazyna reported that its share in the company has decreased from 79.73% to 71.27%. At the same time, in early November, the National Bank announced that it had transferred $1 billion from the National Fund and allocated that money for purchasing KMG shares. The ministry plans to acquire the national oil company’s stock for $2.8 billion in total. As of November 1, 2023, Samruk Kazyna controlled 79.73% of the company, the National Bank – 9.58% and the Finance Ministry – 7.69%.

On November 1, the National Bank revealed a sale of $1.5 billion from the National Fund to ensure the guaranteed transfer to the budget and purchase of the oil company’s shares, although it didn’t say how much money was allocated for the stock purchase. According to data on the regulator’s website, in October the National Bank took $1 billion from the National Fund, while the guaranteed transfer to the state budget was $804 million.

Since the end of last year, the government has twice changed the concept of managing public finances. As a result, the National Fund has obtained new powers. For instance, the fund can buy bonds from Samruk Kazyna with a discount on the market price. The National Bank acts as an agent for the National Fund and conducts currency transactions in the domestic market.

On November 21, KMG announced the completion of the deal with TotalEnergies EP Danmark A/S, a subsidiary of French TotalEnergies, over purchasing of Total E&P Dunga GmbH, which controls 60% of the Dunga oil field.

Over the period from January to September, KMG reported a 10.2% decline in revenue ($13.4 billion), compared to the same period of 2022. The net profit of KMG dropped from $2.532 billion in the first nine months last year to $2.095 billion this year (-18.3%). EBITDA declined by 15.8% to $3.7 billion, free cash flow by 53.4% to $1 billion, while capital costs in contrast increased by 72.1% to $1.1 billion. Total debt and net debt of KMG decreased by 3.2% to $8.67 billion and by 5.2% to $4.39 billion, respectively.

It is worth noting that the production of oil and oil condensate over the period from January to September grew by 9% to 17.5 million tons, the transportation of oil increased by 7.8% to 59.4 million tons and oil processing rose by 0.03% to 14.9 million tons. The cost of Brent crude oil dropped to $82.07 per barrel over the period from January to September 2023 compared to $105.51 per barrel over the same period last year (-22.2%).

During KMG’s initial public offering in December last year, the company offered 3% of its shares. As of October 1, Samruk Kazyna controlled 87.42% of the company’s shares, the National Bank — 9.58% and minority shareholders — 3%. Earlier this year Samruk Kazyna revealed its intention to conduct the secondary public offering (SPO), while the National Bank hasn’t ruled out selling off its shares in the case of SPO.