KMG EP To Acquire 33% Stake In PetroKazakhstan

JSC KazMunaiGas Exploration Production ("the Company" or "KMG EP") on Wednesday announced that it has reached an agreement to acquire a 33% stake in PetroKazakhstan Inc. from the National Company KazMunayGas ("NC KMG").

KMG EP will acquire a 100% stake in KazMunaiGaz PKI Finance B.V. which in turn owns 33% of PetroKazakhstan Inc. KMG EP will pay a total cash consideration of US$100.5m in addition to assumption of existing non-recourse debt provided in 2006 at LIBOR+2.9% and associated liabilities. As of 31 December 2008 the net debt position of KazMunaiGaz PKI Finance B.V. was US$831m. As of the same date PetroKazakhstan Inc. had US$325m of borrowings and US$396m of cash. The purchase will be financed from the existing financial resources of KMG EP.

Kenzhebek Ibrashev, the CEO of KMG EP, said: "The acquisition of the stake in PetroKazakhstan Inc. is a key element of the growth strategy of KMG EP and it further emphasises KMG EP's role as an asset consolidator in Kazakhstan. This deal delivers on the initiatives announced at the time of the IPO and will allow the Company to strengthen its position as a major oil producer in the country."

The independent non-executive directors on the Board of KMG EP unanimously approved the acquisition. The Board of Directors of NC KMG also approved the transaction. The deal will be subject to a number of conditions including the receipt of regulatory clearance and approval of a majority of independent shareholders at the Extraordinary General Shareholder Meeting ("EGM"), scheduled for November 10, 2009. The Circular, which describes the transaction, will be distributed to shareholders and GDR holders in the next few days. The Board of Directors of KMG EP received an opinion from Credit Suisse that the consideration to be paid by the Company in the acquisition of a stake in PetroKazakhstan Inc. is fair to KMG EP from the financial point of view. If approved, the transaction is expected to be closed within a few weeks of the EGM.

KMG EP is among the top three Kazakh oil and gas producers. The overall production in 2008 was 11.95mmt (an average of 240kbopd) of crude oil, including the Company's share in Kazgermunai and CCEL. The total volume of proved and probable reserves as at the end of 2008 is 241mmt (1.8bn bbl), excluding the relevant proportion of reserves at Kazgermunai and CCEL; including the share of reserves from Kazgermunai and CCEL the 2P reserves are over 2.1 bn barrels. The Company's shares are listed on Kazakhstan Stock Exchange and the GDRs are listed on London Stock Exchange. The Company raised approximately US$2bn in its IPO in September 2006.

PetroKazakhstan Inc. is a vertically integrated energy group which is involved in exploration, development and production of hydrocarbons as well as sales of oil and oil products. PetroKazakhstan also has stakes in 16 oil fields, 11 of which are at different stages of development. In 2008 it produced 6.39mmt (136kbpod). The second shareholder of PetroKazakhstan is CNPC Exploration and Development Company Ltd. (CNPC E&D) which owns 67% of the company.


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