KazMunaiGas EP Spends $2.25 Billion on Stakes, Bonds

KazMunaiGas Exploration Production, the London-traded arm of Kazakhstan’s state oil producer, plans to spend $2.25 billion buying stakes in three oil production units as well as bonds from its parent company.

KazMunaiGas EP will pay $750 million for stakes in three oil production units, the Astana-based company said in a statement today. It also “intends to purchase” 220 billion tenge ($1.5 billion) of three-year bonds that will be issued by KazMunaiGaz National Co.

The purchase of the stakes will boost KazMunaiGas’s oil production by almost a third, and result in an increase in proven and probable reserves of 406 million barrels. The parent company aims to become one of the world’s 30 biggest oil producers by 2015.

KazMunaiGas EP will be able to use the bonds to pay for future acquisitions of the parent’s assets, Alexander Gladyshev, head of investor relations, said by telephone from the Astana. The parent company will offset future dividends from the unit against outstanding bonds.

KazMunaiGaz National confirmed that it is considering the transfer of a number of new exploration blocks to KazMunaiGas EP later this year.

Investment

KazMunaiGaz National said in April it plans to invest $4.3 billion this year in production, refining and pipelines, and refinancing existing debt. The company sold $1.5 billion of 10- year bonds in April to finance expansion plans.

Moody’s Investors Service said June 11 that KazMunaiGaz is expected to use the proceeds raised from the bond sale to its subsidiary to repay debt and for general corporate purposes.

KazMunaiGas EP will buy 50 percent of Kazakhoil Aktobe LLP for $350 million, half of Mangistau Investments BV for $330 million and 51 percent of Kazakturkmunai Ltd for $70 million. The cash component of acquisitions will be financed by the company’s own funds.

Separately, KazMunaiGas EP will “gradually reduce” the maximum amount that can be held in Kazkommertsbank and Halyk Savings Bank, the nation’s two largest lenders by assets, to $750 million by the end of 2011 from more than $3 billion, Gladyshev said.

Source: Bloomberg