Zhaikmunai Marks Strong 2009 Performance
Zhaikmunai announced its audited results for the year ended December 31, 2009.
- Strong production growth
- Four new wells on stream
- Costs significantly reduced
- Good progress in the construction of the Gas Treatment Facility
- Successfully completed a secondary share offering raising US $300 million
- EBITDA of US $58.86 million (+ 3 % YoY)
- Strong balance sheet with US $158.73 million cash
All figures in USD millions unless otherwise stated
|Net Cash Flow from Operating Activities||45.934||45.819||+0.25%|
Kai Uwe Kessel, Chief Executive Officer of Zhaikmunai, said, "We are very pleased to have ended 2009 with strong results in spite of the difficult economic climate and the challenges we had to overcome. Looking ahead we are determined to complete the Gas Treatment Facility this summer and to start selling gas, condensate and LPG. It will move us towards another level of development and growth to increase shareholder value."
EBITDA (US $58.86 million vs US $57.15 million in 2008) and net cash flow from operating activities (US $45.93 million vs US $45.82 million in 2008) increased slightly but Net income turned negative (net loss of US $18.77 million vs net profit of US $62.47 million at the end of 2008).
Extraordinary items that influenced financial figures in 2009 are:
- A realized loss on the hedge contract sold in March 2009 of US $9.31 million. This compares to an unrealized gain on this hedge contract of US $63.18 million in 2008.
- An unrealized loss of US $7.60 million recorded on the new hedge contract bought in March 2009.
- The change in functional currency as from January 1, 2009 followed by the devaluation of the Kazakhstani Tenge ("Tenge" or "KZT") has led to a deferred tax balance of US $20.27 million.
In September 2009, Zhaikmunai successfully completed a US $300 million secondary equity offering. In connection with such offering Zhaikmunai and its lenders signed an amendment to the terms of the Company's senior credit facility and pursuant to which all previously existing events of default under such facility were waived or cured.
The nominal long-term debt (the credit facility) at the end of 2009 was unchanged from the previous year at US $381.68 million.
Zhaikmunai ended the year 2009 with US $158.73 million of cash and cash equivalents of which US $21.358 million (vs. US $21.078 million in 2008) is restricted cash. Almost all of this cash is held in USD accounts.
Frank Monstrey, Chairman of Zhaikmunai, said, "Our strong cash position at the end of 2009 enables us to finance all of our capital expenditures for 2010. It will help us to execute our strategy for 2010 to complete the Gas Treatment Facility and start selling gas, condensate and LPG."
As from January 1, 2009, the Group has changed its functional currency from the Kazakhstani Tenge to the USD as a result of increased purchases of materials and other costs from foreign suppliers which were denominated in USD. Moreover, the Group now has all of its financing in USD. Accordingly, all items in the balance sheet as of January 1, 2009 have been translated into USD.
On 4 February Kazakhstan's central bank devalued the Tenge by 18 percent. The devaluation of the Tenge resulted in a deferred tax balance of US $20.27 million coming from the revaluation (in Tenge terms) of the fixed assets. The 2009 current income tax expense is US $7.89 million.
All figures in bbl unless otherwise stated
|Average Daily Oil Production||7,442||5,095||+46.06%|
|Oil Sales - Export||2,383,030||1,463,335||+59.90%|
|Oil Sales - Domestic||292,475||209,885||+62.85%|
|Oil Sales - Total||2,675,505||1,673,220||+39.35%|
|Weighted Average Netback for Crude Oil Sales||$46.81/bbl||$82.53/bbl||-43.28%|
Zhaikmunai's crude oil production volumes grew strongly in 2009 as it brought four new wells onstream, increasing production to an all-time high of 2.698 million barrels of oil, up 46% from 1.749 million barrels in 2008.
The new wells allowed Zhaikmunai to reach a record daily production of 7,442 bbl a day. Fourth quarter average daily oil production reached a new quarterly record of 7,559 barrels.
The higher volumes partially offset the impact of lower crude oil prices as the overall 2009 revenues declined 14% to $116.74 million.
The successful 2009 drilling program brings the total number of wells in production at end 2009 to 15.
In 2009 Zhaikmunai brought the 120 kilometer pipeline from the Chinarevskoye field and its own rail terminal into operation, eliminating the high cost of transporting oil by truck to a rail terminal owned by a third party. As well as reducing selling and transportation costs, this has improved safety and efficiency.
As a result, selling and oil transportation expenses decreased by US $18.5 million, or 76.4%, to US $5.7 million in 2009 from US $24.2 million in 2008 primarily due to the fact that the oil pipeline from the field to the terminal went into operation in January of 2009. No export duty was payable on the Company's exports in 2009 as the export duty rate has been set at zero.
In January 2009 the 120km oil pipeline from the Chinarevskoye field to the City of Uralsk and the Company's own rail terminal came into operation. This eliminated the costs associated with transportation oil by truck from the field. The introduction of the new pipeline has provided both safety and efficiency improvements as well as reductions in selling and transportation expenses.
Zhaikmunai completed the construction of a 17 km gas pipeline that is connected to the Orenburg Novopskov pipeline. After completion of the Gas Treatment Facility the Group will start transportation of sales gas through this newly built gas-pipeline.
Marketing & Sales
In 2009 Zhaikmunai expanded its sales and marketing department by hiring experienced traders for condensate, natural gas and LPG. The team is working towards new contracts and transportation options for the gas, condensate and LPG with a view to having such arrangements in place by the time the gas treatment facility nears completion. To date Zhaikmunai has only sold crude oil.
Gas Treatment Facility
Construction of the Gas Treatment Facility is ongoing despite severe weather conditions in northwestern Kazakhstan at the beginning of 2010. Progress at December 31 for overall engineering (design, project management & administration) against the project plan was 88%.
At the end of the year Zhaikmunai successfully started drilling its first horizontal well ("well 119"). Well 119 was flowed for ten days and exceeded expectations, flowing at 26,475 million cubic feet (MMcf) of natural gas and 4,410 barrels of condensate per day on a 20 mm choke from the Middle Devonian Biski carbonate formation. Additional hydrocarbons are expected in the Afoninski reservoir, which is expected to be tested separately at a later stage.