Uchenna Izundu
International Editor
LONDON, Mar. 6 -- KazMunaiGas Exploration & Production (KMG EP) has offered $1.07 billion to its parent company National Co. KazMunaiGas (NC KMG) for a 50% stake in JV Kazgermunai LLP (KGM).
A majority of KMG EP independent shareholders must approve the deal before it can be finalized. The proposal will be evaluated at the company's extraordinary general meeting on Apr. 12 in Astana. If approved, the transaction could go through in first-half 2007.
The transaction, if accepted, would elevate KMG EP to the second largest oil and gas producer in Kazakhstan after NC KMG, Kazakhstan's state owned oil and gas company.
KGM, Kazakhstan's eighth largest oil producer, produced 60,000 b/d of oil in 2006 and had 310 million bbl of proved and probable reserves at the end of September 2006.
KMG EP said the purchase would help it build its 2P reserves by 11% to 1.6 billion bbl from 1.4 billion bbl. Production (in 2005 figures) would leap to 223,000 boe/d from 193,000 boe/d. KMG EP also found KGM attractive because of its low production costs, the relative youth of the fields, which started production in 1990, and the attractive tax regime under which it operates.
KMG EP, currently the third largest Kazakh oil and gas producing company, produces light crude with an API gravity of 38° and transports it to Western export markets and western China. It had 1.5 billion bbl of proved and probable reserves at yearend 2005 and over 190 million b/d of crude production in 2006.
KMG EP said Credit Suisse has assessed the $1.07 billion offer as fair. If the KMG EP shareholders agree, the deal will conclude in the first half of 2007. KMG EP will use internal funds to pay for the 50% stake in KMG, and it can withdraw its offer if oil prices fall below $50 before the deal closes.
Contact Uchenna Izundu at [email protected].