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KazMunaiGas EP Second-Quarter Net Falls 16% on Output Cuts

KazMunaiGas Exploration Production (KMG), the London-listed unit of Kazakhstan’s state-owned energy company, said profit slumped 16 percent in the second quarter from a year earlier as output and global oil prices declined.

Net income dropped to 46.2 billion tenge ($309 million) from 55.3 billion tenge a year earlier, KazMunaiGas EP said today in a statement. Total revenue fell 10 percent to 218 billion tenge.

Output fell about 3.5 percent in the second quarter to 3.03 million metric tons, or 248,000 barrels a day, according to Bloomberg calculations based on first-half and first-quarter results. Average Brent prices declined about 7 percent, according to data compiled by Bloomberg.

KazMunaiGas EP cut the output target for its biggest unit, Uzenmunaigaz for this year, which “changes the picture for next year, that is, the earlier announced production forecast for 2013 will probably also be corrected,” Abat Nurseitov, Deputy General Director for Production, said today on a conference call. The updated plan will available at the end of this year, he said.

Output at Uzenmunaigaz will probably be 5 million tons this year, rather than 5.8 million tons as earlier planned after declines in the first half because of the effects of labor unrest last year, bad weather in the first quarter and deteriorating infrastructure and equipment, the company said.

The stock rose 0.1 percent to $18.60 by 2:57 p.m. in London, reversing losses of as much as 3.1 percent.

KazMunaiGas EP may cut capital expenditures by a preliminary $35 million from the planned exploration spending for this year, after canceling some drilling, Murat Mustafayev, chief geologist, said on the conference call.

The Astana, Kazakhstan-based oil producer is preparing an appeal of a tax assessment of 16.9 billion tenge for 2006 to 2008 based on an audit completed July 12 by Kazakhstan’s Tax Committee, according to today’s statement.

In the first half, an increase in domestic prices helped offset dropping exports and output in the first half of the year. Total revenue fell 1.7 percent, while profit increased 6 percent.

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Steve Voss at sev@bloomberg.net

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