London-listed Kazakh oil and gas producer KazMunaiGas Exploration Production, or KMG EP, (RDGZ.KZ) said Monday its third-quarter net profit declined 27% on the year to 51.81 billion tenge ($348.5 million), mainly due to lower oil prices, but pointed to an improvement in market conditions.
KMG EP Chief Executive Kenzhebek Ibrashev said: "The market conditions and outlook are getting better and we intend to significantly increase capital expenditure next year with the focus on development of drilling, associated gas utilization and exploration."
KMG EP said it expects to raise its oil production to 13-13.5 million metric tons, or about 257,500-267,400 barrels of oil per day, next year from 11.5 million tons, or about 228,000 bpd, expected for 2009 "assuming that the acquisition of the 33% stake in PetroKazakhstan is finalized by the end of 2009, as expected."
"KMG EP expects to approximately double capital expenditure in 2010 compared to 2009, due to increased drilling activity, aimed at stabilising oil production, implementation of associated gas utilisation program and exploration drilling," the company said.
KMG EP said its profit from operations was KZT50.1 billion in the third quarter of this year, down from KZT107.1 billion in the same period a year earlier.
The Kazakh company's revenue fell to KZT141.02 billion in the third quarter from KZT182.5 billion.
KMG EP said its net income for the first nine months of 2009 was KZT180.6 billion, a year-on-year 17% decline, "attributable mainly to the decrease in revenue as a result of lower oil prices."
Artem Konchin, an oil and gas analyst at UniCredit Securities, said in a note that KMG EP's third-quarter results came in "broadly in line with expectations." "We expect the results to receive a warm reception from the market," he said.
KMG's Ibrashev said that the company expected "to close acquisition of the 33% stake in PetroKazakhstan by the end of the year with the impact on our consolidation production beginning next year."
On its capital investment plans, KMG EP said: "The full-year 2009 plan for capital expenditures of approximately KZT45.3 billion implies a further quarter-on-quarter capex increase in the fourth quarter of this year," "It is planned to finalize a few major drilling and capital construction projects."
The Kazakh oil producer said that it was "assuming an oil price of $50 per barrel for 2010 budget purposes, adhering to a conservative oil price scenario, in line with the government's macroeconomic forecast and the budgeting oil price assumption used by the company's parent, National Company KazMunaiGas."
KMG EP also said that its consolidated production plan for this year has been cut by 1.2% as a result of a reduction in UzenMunaiGas's production plan to 127,000 bpd day from 129,900 bpd.
KMG EP produced an average of 233,700 bpd during the first nine months of 2009, down 3% from the same period last year.
KMG EP had said earlier that the fall was mainly because of a drop in output at the beginning of the year, which it blamed on severe weather conditions in western Kazakhstan.