KazMunaiGas EP ‘Super Dividend’ Payment Unlikely, RenCap Says

Market expectations that KazMunaiGas Exploration Production will pay a “super-dividend” for 2012 to help its parent company pay off debt are “too optimistic,” Renaissance Capital said.

“Our base case is that dividends from KMG EP would cover only half of the required capital for the parent company,” Moscow-based Renaissance analysts Ildar Davletshin and Artem Kvas wrote in a note today. They forecast a payout of about $1.9 per global depositary receipt, which equates to an 11 percent yield.

“There are other options available for KazMunaiGaz National Co. to raise money, including a new bond issued to KMG EP” to repay debt, Renaissance said.

RenCap downgraded KazMunaiGas EP to hold from buy, cutting the target price for its GDRs by 30 percent to $16. RenCap says KazMunaiGas EP has stabilized production at core fields at the cost of higher capital expenditure, without reaching pre-strike levels.

Bakdaulet Tolegen, a spokesman for KazMunaiGas EP, didn’t immediately reply to an e-mail seeking comment.

Police used armed force to suppress unrest in Zhanaozen last year after a strike over wages by employees of state-controlled KazMunaiGas EP sparked a riot during Dec. 16 Independence Day celebrations in 2011. KazMunaiGas EP’s oil output, which fell 7 percent in 2011, may only return to 2010 levels of 13.3 million metric tons by 2016, RenCap said.

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