KazMunayGas intends to sell 50% stake in KMG Kashagan B.V. to Samruk-Kazyna for $4.7 bln
ASTANA. July 1 (Interfax) - Kazakh oil company KazMunayGas (National Company KazMunayGas, NC KMG) intends to sell a 50% stake in KMG Kashagan B.V. to State Fund Samruk-Kazyna for $4.7 billion, Fitch Ratings said in a statement.
"NC KMG has announced its intention to sell half of KMG Kashagan B.V., which holds 16.88% stake in Kashagan, to Samruk-Kazyna, its immediate parent, for around USD4.7bn in cash and to use the cash proceeds to repay a portion of its debt. We believe that if completed, this deal would help NC KMG improve its financial profile over the medium term. We also view this transaction as evidence of continued state support for NC KMG, and the Stable Outlook factors in the expectation that the deal will be concluded as proposed," according to the statement.
Fitch Ratings affirmed NC KMG's long-term foreign currency Issuer Default Rating (IDR) at 'BBB' with a stable outlook, the rating agency said. Fitch also affirmed KazMunaiGaz Finance Sub B.V.'s foreign currency senior unsecured rating at 'BBB'.
Meanwhile NC KMG said in its notification posted on the website of the Kazakhstan Stock Exchange (KASE) on Wednesday that the deal involving the sale of the 50% stake in KMG Kashagan B.V. to the state fund is to be closed by the end of 2015.
Samruk-Kazyna would provide NC KMG's subsidiary - Sotsr KMG - with an option to buy the whole stock or same stake of shares in KMG Kashagan B.V an any time between January 1, 2018 and December 31, 2020 at a price equal to the purchase price adjusted so that it reflect any funds - contributed or split up if available, according to the statement.
NC KMG said the purchase of the stake in KMG Kashagan by State Fund Samruk-Kazyna would allow NC KMG to exclude nearly $2.2 billion in debts from consolidated financial statements related to the North Caspian Project and accordingly the national company's net consolidated debt by the same amount .
This purchase option would also provide a possibility for NC KMG to increase EBITDA the national company may obtain after Kashagan starts producing oil.
NC KMG expects that the stake sale and debt reduction plan would help it improve its financial standing, cut the current debt service fees thereby improving total liquidity and together with changes in monetary resources application would allow it to go on to support financially its current liabilities under the planned capital expenditure program.
Oil production at Kashagan began on September 11, 2013. According to the PSA (Production Sharing Agreement), the field was to have reached the commercial production level by October 1, 2013. On September 24, 2013, however, the gas pipeline that ran from Island D to Bolashak Unit failed leading to a gas leak. The Kashagan field was shut down for repairs until October 6, when oil production was resumed. On October 9, 2013 another gas leak was detected on the same pipeline and, once again, the oil production was suspended and has not been resumed since then. The company said earlier that the gas leak in the pipeline was caused by sulfide stress cracking. According to the inspection report, the gas pipeline and oil pipelines need to be replaced.
Kashagan may start producing oil in late 2016 - early 2017, according to a recent statement made by Karim Massimov, Kazakh prime minister.
Kashagan is developed by NCOC that is owned by AgipCaspian Sea B.V. (16.81%), KMG Kashagan B.V. (16.88%), ExxonMobil Kazakhstan Inc. (16.81%), Inpex NorthCaspian Sea Ltd. (7.56%), Shell Kazakhstan Development B.V. (16.81%), Total EP Kazakhstan (16.81%) and CNPC Kazakhstan B.V. (8.33%).
The recoverable resources of the Kashagan field are estimated at 11 billion barrels and oil in place at nearly 35 billion barrels. Kashagan is considered to be the second largest oil field in the world following Prudhoe Bay Oil Field in Alaska, which was discovered in 1968.
