KMG EP operating results for 9M2017

Altynay IbraimovaOctober 26, 2017

KMG EP produced 8 884 ths tonnes of crude oil in the 9M2017 (including its stakes in associated company), a 3% decrease yoy.

OMG produced 4 092 ths tonnes, a 2% decrease year on year, mainly due to fewer wells drilled. EMG produced 2 117 ths tonnes, 0.2% less than in 9M2016.

The total volume of oil OMG and EMG produced was 6 209 ths tonnes, a 1% decrease compared to the same period of 2016.

Table 1. Operational results

 

 

ths tonnes

9М2016

9М2017

yoy

Oil production volumes

OMG

4181

4092

-2%

EMG

2122

2117

0%

Joint ventures

2831

2675

-6%

Total

9134

8884

-3%

 

 

 

 

Sales from OMG and EMG

 

 

 

Export

3743

4200

12%

share, %

60%

69%

 

Domestic market

2540

1856

-27%

share, %

40%

31%

 

 

 

 

 

Sales from JV

 

 

 

Export

1416

1045

-26%

share, %

51%

41%

 

Domestic market

1353

1506

11%

share, %

49%

59%

 

Source: Company data

 

 

 

A more positive picture is observed in sales volumes. The sales volume of OMG and EMG for 9M2017 amounted to 6 056 ths tons of crude oil. Of these, 69% were sold on export and 31% on the domestic market, which is 9pp lower yoy (40% for 9M2016). The Company, as planned, reduced the least profitable sales.

Our view

The production in OMG in the reporting period was less than we expected by 7%. Nevertheless, given the favorable oil prices and the increase in the share of exports, we expect the revenue to grow by 8% yoy in 2017. We view the operating results as neutral. In our opinion, the decline in production at Emba and Ozen has already been discounted in the share price and the market appreciates the company's ability to keep high level of export sales. During 9M2017, the export / domestic market ratio remains at the planned level, which, in our opinion, makes it possible to neutralize the reduction in production. We maintain our "Hold" recommendation and do not exclude the revision of the target price after the publication of financial results on November 15-17, 2017.