Q1 2013 Operational Update - Outperforming Targets

RNS Number : 8427C

Zhaikmunai LP

22 April 2013

 

Q1 2013 Operational Update - Outperforming Targets

Amsterdam, 22 April 2013- Zhaikmunai L.P. (LSE: ZKM) ("Zhaikmunai"), the oil and gas exploration and production enterprise with assets in north-western Kazakhstan, today announces record operational results in respect of its first quarter ended 31^st March 2013.

The financial information in this operational update is being issued in advance of the release of Zhaikmunai's Q1 2013 unaudited and consolidated accounts, which is scheduled for the week of May 20, 2013, as a consequence of certain regulatory requirements in the Republic of Kazakhstan. The financial information in this update has not yet been audited and remains subject to further review.

RECORD FIRST QUARTER RESULTS (Q1 2013)

·     Record total average daily production of 46,273 boepd, an increase of 25% compared to FY2012 average (36,940 boepd);

·     Record total revenue of US$ 228 million, up 40% compared to Q1 2012 (US$ 163 million);

·     Record EBITDA expected to be above US$ 140 million (Q1 2012: US$ 110 million);

·     Total cash position of US$ 287 million (including short-term deposits) up 14% compared to the end of FY 2012 (US$ 251 million);

·     Total net debt fell to approximately US$ 363 million;

·     Net debt to EBITDA ratio fell below 0.75x;

·     Excess cash to be deployed through a GDR Buy-Back Programme of up to US$ 50 million;

·     Appointment of Deutsche Bank AG, London Branch ("Deutsche Bank") and VTB Capital plc ("VTB Capital") as joint corporate brokers.

OPERATIONS AT AN ALL TIME HIGH

Record Production Drives Revenue and EBITDA Higher

·     Total average daily production for Q1 2013 was 46,273 boepd, an increase of approximately 24% compared to Q4 2012 (37,184 boepd);

·     Q1 2013 total average daily production was above the 2012 guidance of 45,000 boepd;

·     The product split for Q1 2013 was as follows:

PRODUCTS	Q1 2013 Average Production	Q1 2013 Product Mix %
Crude Oil & Stabilised Condensate	19,705 boepd	43%
LPG (Liquid Petroleum Gas)	3,651 boepd	8%
Dry Gas	22,917 boepd	49%
TOTAL	46,273 boepd	100%

Kai-Uwe Kessel, Chief Executive Officer of Zhaikmunai, commented:

"I am delighted with the outstanding performance we have achieved operationally in the first quarter of 2013. Our production is above our target for the year, our cash flows are ahead of the budget and we continue to enhance the operations at the field site. I am pleased with the progress made on the drilling side as we continue to develop the reserves of the Chinarevskoye field. As a result, we have built a strong and stable cash position, which allows us to return cash to shareholders through both dividends and GDR buy-backs whist still providing us the room to execute all of our strategic initiatives. In addition, we are delighted to appoint Deutsche Bank and VTB Capital as our joint corporate brokers and we look forward to working with them to enhance recognition of the Zhaikmunai success story in the market."

Drilling activities

·     A total of three extra new wells have been completed in the course of Q1 2013: 2 gas condensate production wells and 1 crude oil appraisal well;

·     Wells # 216 and # 410 are the two gas condensate wells completed in Q1 2013:

o  Well # 216 (Biski-Afoninski) was drilled as a deviated directional gas condensate production well for the Biski-Afoninksi reservoirs about 3 km west of production Well # 119. Reservoir pressure is in line with expectations and the well is currently under test operations and has been connected to the GTF, producing some 300,000 m³ of raw gas per day on a 10 mm choke, which is approximately 3,500 boepd. The well is under preparation for further testing with larger choke sizes;

o  Well # 410 (Tournaisian) was drilled using the same successful directional drilling technology previously applied for Tournaisian gas condensate wells. It has found the top of the Southern Tournaisian reservoir approximately 20 metres lower than expected and is currently under test operations;

·     Well # 701 is the appraisal well completed in the Middle Carboniferous Bashkirian oil reservoir in Q1 2013:

o  Well # 701 was drilled in the northeastern part of the Chinarevskoye field about 600 metres southeast of Well # 51, which had tested oil from the Bashkirian reservoir in a drill stem test. Drilling of Well # 701 was finalised in March 2013. The planned test for the Bashkirian horizon will start at the end of April and will test flow rates from a 9 m oil bearing reservoir interval at different choke sizes.

·     Zhaikmunai is on target to achieve its planned drilling programme for 2013, i.e. 15 - 17 wells, 9 of which will be appraisal wells, 1 exploration well and 5 to 7 production wells. The field currently has 15 oil wells and 12 gas condensate wells in operation.

Other News 

Initiation of GDR Buy-Back Programme

On 22 April 2013, Zhaikmunai also announces the terms of commencement of a long-term GDR Buy-Back programme to assist in driving shareholder value. The details of this programme are featured in a separate announcement. The programme will commence following the release of the Q1 2013 Results, which are scheduled during the week of May 13, 2013.

This follows the announcement made on 2 April 2013 that on Thursday, 28 March 2013 the limited partners of Zhaikmunai duly passed all proposed resolutions at the Special General Meeting of limited partners. These resolutions approved amendments to Zhaikmunai's limited partnership agreement to provide for a GDR Buy-Back Programme and the implementation of such programme by Zhaikmunai Group Limited, Zhaikmunai's general partner.

Appointment of Joint Corporate Brokers

On 18 April 2013, Zhaikmunai appointed Deutsche Bank AG, London Branch ("Deutsche Bank") and VTB Capital plc ("VTB Capital") as joint corporate brokers with immediate effect. In addition to the standard broking role the two banks are expected to implement Zhaikmunai's GDR Buy-Back Programme.

Gas Flaring Claim

On 11 April 2013, Zhaikmunai LLP received a statement of claim from the West Kazakhstan Inter-regional Geology and Subsoil Use Department requesting a Kazakh court to impose damages on Zhaikmunai LLP in the amount KZT 1,758,171,972 (approximately US$ 11 million) for allegedly flaring gas without the appropriate permit during Q4 2010 and July 2011.

Zhaikmunai believes that the claim is unfounded, has filed a petition challenging the basis for the claim in the Kazakh courts and intends to vigorously contest the claim. The claim does not affect Zhaikmunai's ongoing operations.

KASE (Kazakshtan Stock Exchange) Presents Zhaikmunai with Special Award

On March 29 2013, Zhaikmunai was presented with a special award by KASE for its transparency record.

Arnat Abzhanov, Member of the Management Board, JSC Halyk Finance, commented:

"Companies who are listed on more than one stock exchange are faced with different and sometimes conflicting reporting requirements. The KASE award demonstrates that Zhaikmunai manages these challenges efficiently every day and is fully committed to all of its security holders."

Expansion of Processing Capacity with Additional Train to Gas Treatment Facility

Design of the third train of Zhaikmunai's Gas Treatment Facility (GTF) has been completed and has received approval from the Kazakh authorities. Zhaikmunai is currently analyzing and evaluating the bids for the final selection of the main process and auxiliary equipment vendors. The tender for civil and construction works has been launched and results are expected in the course of Q2 2013.

RELEASE OF ZHAIKMUNAI'S Q1 2013 RESULTS

Zhaikmunai L.P. plans to release its unaudited consolidated accounts for its first quarter ended 31^st March 2013 in the week of May 13, 2013. Zhaikmunai's management team will be available for analysts and investors for a Q&A session following the release. Registration details for the conference call will be provided well in advance of the scheduled release date.

Further information

For further information please visit www.zhaikmunai.com

Further enquiries

Zhaikmunai LP - Investor Relations

Bruno G. Meere

Kirsty Hamilton-Smith

[e-mail]             + 31 20 737 2288

Deutsche Bank                                               + 44 (0) 207 545 8000

Ben Lawrence

JM Hafner

Rob Abbott

VTB Capital plc                                               + 44 (0) 203 334 8000

Alexander Metherell

Marcus Brown

Giles Coffey

Pelham Bell Pottinger                                     + 44 (0) 207 861 3232 

Philip Dennis

Elena Dobson                                                

About Zhaikmunai

Zhaikmunai is an independent oil and gas enterprise currently engaging in the production, development and exploration of oil and gas in north-western Kazakhstan. Its Global Depositary Receipts (GDRs) are listed on the London Stock Exchange (Ticker symbol: ZKM). Zhaikmunai's principal producing asset is the Chinarevskoye field, in which it holds a 100% interest and is the operator, through its wholly-owned subsidiary Zhaikmunai LLP. In addition, Zhaikmunai holds a 100% interest in and is the operator of the Rostoshinskoye, Darinskoye and Yuzhno-Gremyachenskoye oil and gas fields. Located in the pre-Caspian basin to the north-west of Uralsk, these exploration and development fields are approximately 60 and 120 kilometres respectively from the Chinarevskoye field.

Forward-Looking Statements

Some of the statements in this document are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of the Partnership or its officers with respect to various matters. When used in this document, the words "expects," "believes," "anticipates," "plans," "may," "will," "should" and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements.

Deutsche Bank

Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin - Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the Financial Conduct Authority (the "FCA"). Details about the extent of Deutsche Bank AG's authorisation and regulation by the FCA are available on request.

VTB Capital

VTB Capital Plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

 

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