KazMunaiGas to Acquires Stake in Citic for $930 Million
KMG EP has approved a series of transactions to acquire a 50% beneficial interest in CITIC Canada Energy, 100% owner of CITIC Canada Petroleum (formerly Nations Energy Co., Ltd.), from CITIC Group for approximately US$930 million including purchase consideration of US$875.5 million and US$54.5 million of financing costs. The acquisition is subject to certain regulatory approvals and should be completed before the end of the year.
The purchase of a 50% interest in CCEL by KMG EP is based on an option granted by CITIC to JSC National Company KazMunaiGas in December 2006 and transferred to KMG EP in May 2007. The purchase consideration of approximately US$ 875.5 million represents 50% of the amount paid by CITIC to the previous owners of CCPL in December 2006.
CCPL’s main asset is 94.6% of the share capital and 100% of voting control of JSC ‘‘Karazhanbasmunai’’ ("KBM"), a large oil and gas company developing the Karazhanbas field in the western part of Kazakhstan. Total proven reserves of KBM as of January 1, 2007 amounted to approximately 363.8 million barrels of oil according to a Miller and Lents reserve report. Oil production from the field in 2006 was 2.3 million tonnes (42.7 kbopd).
Part of the total acquisition consideration in the amount of US$150 million will come from KMG EP’s own funds and will be entitled to receive a preferred return of US$26.2 million p.a. from the project. CITIC will provide limited recourse financing to the purchaser to finance the remaining balance of the purchase consideration and other financing charges at a cost comparable to KMG EP’s own cost of financing. Management structure of CCEL and CCPL as well as underlying assets will include representatives of both shareholders. Important matters, including related party transactions, annual work plan, budget, significant financial commitments and significant supply contracts will require unanimous approval.
Commenting on the deal, Mr. Askar Balzhanov, Chief Executive Officer of KMG EP, said: "With the acquisition of Karazhanbasmunai we continue to implement our growth strategy by adding another 10% to our current production level. The deal demonstrates our ability to expand our domestic asset base on attractive terms. We are working closely with CITIC with the goal to improve performance of Karazhanbas field".
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