Karazhanbasmunai OJSC (Kazakhstan): brief characteristics

12.12.00 00:00
/IRBIS, Dec.12, 00/ - Following is brief characteristics of Karazhanbasmunai OJSC (company), prepared by the IRBIS specialists on the basis of the materials of the Listing commission of the Kazakhstan Stock Exchange (KASE), Karazhanbasmunai OJSC, the National Securities Commission (NSC). The characteristics is published due to the entering the first issue bonds of Karazhanbasmunai OJSC into official list of the KASE securities under category "A". The management of Karazhanbasmunai OJSC is fully liable for the reliability of the information presented to the Listing commission of the KASE. GENERAL INFORMATION The date of initial state registration - May 15, 1995. Legal status - open joint stock company. Ownership - private. Legal address of the head office - 23rd microdistrict, Aktau, Mangistau region, 466200, Kazakhstan, actual address - 15th microdistrict, building 18, Aktau, Mangistau region, 466200, Kazakhstan. PRIMARY ACTIVITIES, MEMBERSHIP Primary activities of the company are the development of "Karazhanbas" deposit site, extraction, preparation, realization and processing of oil, introduction of thermal methods of oil productivity, construction of wells, purification and processing of crude oil, construction of facilities for oil preparation, exporting, marketing and sales of hydrocarbons and hydrocarbon products. The major goal of the company, based on the Charter, is the extraction of oil and gas in Kazakhstan, as well as by attracting different investments into oil and gas industry, and receiving income from such activities. Karazhanbasmunai OJSC is a member of the Kazakhstani oil and gas association (KOA), which is a forum aimed at the exchange of commercial information in order to develop exploration and production activities in oil industry. From 1997 the company is also a constant participant of an annual exhibition "Oil and gas of Kazakhstan" (KIOGE). LICENSES - Of the government of Kazakhstan to use the mineral resources in order to extract hydrocarbons on oil and gas deposit site "Karazhanbas" in Tupkaragan district of Mangistau region for 25 years; enacted on June 7, 1995. - Of the government of Kazakhstan to use the mineral resources in order to extract building sand at the open-pit mine #9 in Tupkaragan district of Mangistau region for 15 years; enacted on April 7, 1995. - State license of the Committee on construction affairs of Kazakhstan to conduct construction and design works in Kazakhstan, enacted on June 5, 2000; to be validated annually. RESERVES Based on the license of the government of Kazakhstan to use the mineral resources in order to extract hydrocarbons on oil and gas deposit site "Karazhanbas" in Tupkaragan district of Mangistau region, as of January 1, 1997, and on the basis of the approval of the State committee of Kazakhstan on the reserves industrial reserves equaled: - oil: geological - 238,535 th. tons; extractable - 96,983 th. tons; - dissolved one: geological - 1,908 mln cubic meters; extractable - 776 mln cubic meters; - gas from gas caps: geological - 25 mln cubic meters. Remaining reserves as of indicated date (by the company prospectus - categories A+B+C1) equal: - oil: geological - 225,811 th. tons; extractable - 84,259 th. tons; - dissolved one: extractable - 675 mln cubic meters; - gas from gas caps: geological - 25 mln cubic meters. The mountain allotment has an area of 16,001 ha. The extraction is allowed within the deposits of lower cretaceous and mid Jurassic layers till the mark negative 500 meters. "Karazhanbas" deposit site is located on Buzachi peninsula to the north of Aktau port. As of late September 2000, from the beginning of extraction works 15 mln tons of oil was extracted (15% of extractable reserves), remaining extractable reserves equal 82 mln tons. Based on the re- evaluation, conducted in August 1999 by Mille and Lenz Ltd. consulting company, remaining extractable reserves equal 17.5 mln tons. Another 30 mln, based on the estimates of Mille and Lenz Ltd. and Nation Energy Co. Ltd. specialists, can be extracted beyond the boundaries of current developed area. BRIEF ESTABLISHMENT HISTORY In 1986 the Administration of experimental oil and gas extraction of Kazakhstan was established as a separate enterprise - NGDU Karazhanbasneft. In 1994 NGDU Karazhanbasneft was reorganized into joint stock company Karazhanbasmunai. On March 20, 1996 the company was registered with the Justice department of Aktau as joint stock company Karazhanbasmunai. According to the purchase and sale agreement of the state block of shares of Karazhanbasmunai JSC, signed between the government of Kazakhstan and the Canadian Triton-Wuko Energy Group Ltd. (renamed into Nations Energy Co. Ltd.) on April 10,1997, 94.622% of the company shares (100% of voting shares) were bought by Triton-Wuko Energy Group Ltd. On September 8, 1999 the company was re-registered as open joint stock company Karazhanbasmunai. As of September 30, 2000 the number of Karazhanbasmunai OJSC workers equaled 1,941. CAPITAL AND SHAREHOLDERS As of September 30, 2000 announced authorized capital of Karazhanbasmunai OJSC equaled KZT2,161,251 mln and was fully paid. Total of 2,045,035 common inscribed (KZ1C00160225) and 116,216 preferred inscribed (KZ1P00160220) shares were issued with KZT1,000 face value. The share issue was registered with the NSC on Jan.10,97 under the number A0016-1. The floatation report was approved by the NSC on Oct.21,97. The issuer's register is maintained by the Tsentr Dar LLP (Almaty). Based on the extract from the securities holders register, as of May 30, 2000 the shares of Karazhanbasmunai OJSC were held by 1,457 shareholders. The Nations Energy Co. Ltd. holds 100% of common shares, which is 94.62% of all the shares. The Nations Energy Co. Ltd. was registered in Canada, and has a head office in Houston, USA and representatives in Aktau, Almaty, Geneva and Calgary. The company develops new production companies on the basin of the Caspian Sea, Central Asia and Far East. The company's major shareholder is the Cyprus based corporation, Ekolo Investments Ltd., who has 90% of the Nations Energy Co. Ltd. shares. Total capitalization of the Nations Energy Co. Ltd. reached about $70 mln as of May 1, 2000. ACTIVITIES Karazhanbasmunai OJSC is an integral company without subdivisions and a single operator of the "Karazhanbas" oil site. After the breakup of the Soviet Union and until the privatization of the company, the drilling works were completely shut down at the "Karazhanbas" sited, and part of the equipment was broken. As of April 1999 only 450 wells out of 1,052 wells were in working condition, but actually, less than 100 was in operation. The program of major overhaul of the wells, that began in May 1999, increase the number of working wells up to 235. In May 2000 a new program for drilling 50 wells was launched. As of today 20 wells have been drilled, of which 19 is being used. The volume of daily production from one well varies from 60 to 1,200 barrels (8.2 - 164 tons), which proves that average daily production can by 250 barrels (31 tons), that is the volume used when the project was developed. The most of produced oil has a high degree of viscosity and in order to increase the oil productiveness the pressure is maintained within the layers by pumping a steam into the wells. Also, the oil production is increased by optimizing the drilling grid, mechanical impact on the layer and washing the collectors with chemicals. The company sells all the oil by itself, and from June 1997 more than 2 mln tons were sold. A regional company was established on the basis of the marketing department of the Karazhanbasmunai OJSC, which markets crude oil extracted from "Karazhanbas" site and by other companies on the basis of offering paid services. The location of the site allows the company to use several oil transportation routes, which enables it to redirect the crude oil to the most favorable market. The company has a direct access to the pipelines of NOTC KazTransOil CJSC in the south of the deposit site, and using it the company transports its crude oil to Aktau port. The most of the oil then goes through Aktau - Makhachkala - Novorossiisk by tankers, railroads and pipelines. The oil is also sent to Samara through the KazTransOil systems passing by Uzen and Atyrau. From Samara the oil goes through Russian TransNeft system to the Black Sea ports and to the European countries. Part of the oil is exported by the tankers to Baku and Makhachkala with further transportation to Europe by railroads or pipelines. Average indicators per ton of oil sold by Karazhanbasmunai OJSC (KZT/ton) -------------------------------------------------------- In 1998 In 1999 In III Q 2000 Indicator -------------------------------------------------------- Sales price 66 96 140 Cost 47 24 22 Transportation expenses 16 22 28 -------------------------------------------------------- Crude oil sales volumes of Karazhanbasmunai OJSC ------------------------------------------------------------- Sales volume, Weighted average price Period tons gross (USD/ton) ------------------------------------------------------------- July 31.97 - Dec.31.97 246,000 89 1998 455,600 66 1999 485,000 96 Jan.1.00 - Oct.31.00 650,000 140 ------------------------------------------------------------- Additional transportation and marketing opportunities are the use of the Caspian Pipeline Consortium (CPC), which will be put into operation by June 30, 2001, as well as the possibility of increasing the oil price by selling high grade blends. Presently, Karazhanbasmunai OJSC works with Tengizchevroil to develop the market for "Light Ural Export Blend", which consists of the blends of oils from Buzachi peninsula and Tengiz. The company is still developing new markets. For example, in July 1999 Karazhanbasmunai OJSC shipped the first batch of crude oil to Lithuanian oil refinery "Majeikju Nafta". IMPORTANT DEVELOPMENT PROJECTS "Karazhanbas" deposit site rehabilitation project Rehabilitation of oil fields on developed sides of "Karazhanbas" deposit site is the high priority task for Karazhanbasmunai OJSC. Estimated general expenses of the project equals $209 mln. Financing will be conducted through the use of reinvested funds, produced by Karazhanbasmunai OJSC, long-term financing of the Kazakhstani banks and through bond issue on the stock market of Kazakhstan. The major goals of the project are: - to change the development system of "Karazhanbas" deposit site in order to use the reserves in hardly accessible collectors and increase the oil production coefficient in mid and high productive collectors; - to drill 50 wells on the deposit site and their development in order to increase the production volumes (16 wells were drilled in 2000); - to reconstruct the deposit site in order to increase the technological effectiveness and the life of the layer pressure maintaining and collector facilities; - to reconstruct the transportation within the field, storage tanks and oil purification tanks. As a result of these works the production on the deposit site and on its boundaries can be increased up to 60,000 barrels a day, or 3 mln tons a year within the next three years. In order to finance the project the Karazhanbasmunai OJSC has signed credit agreements with several Kazakhstani banks for a total of $27 mln. As of September 30, 2000, the company completely used the funds. Restoration of existing and preserved wells It is planned to increase the number of facilities for conducting major overhaul of the wells from 5 to 9, which should allow the company to restore the production at all economically viable wells. Development of Eastern sector After drilling exploration wells in Eastern sector, the plot with the area of 22.4 square km was identified for the production drilling. The development plan of the Karazhanbasmunai OJSC includes the development of 276 new wells (138 production and 138 pumping wells). It is planned to construct a new processor for the preparation of about 15,000 barrels of oil a day (750 th. tons a year). Based on the drilling results and work experience on "Karazhanbas" deposit site, geological reserves of the Eastern sector are estimated at 81 mln tons, extractable - 29 mln tons. Development of Western sector By drilling exploration wells it was proved that it is possible to produce oil up to six kilometers off the development site borders and the plot usable for the production drilling was outlined. The development of the Western sector, including the drilling of 176 wells, was planned for the year 2002. Development of other sites After the drilling of two exploration wells Karazhanbasmunai OJSC estimates the sizes of other perspective sites located to the north of the field, as 33 square kilometers. These sectors are to be developed in 2004. It will require the drilling of about 350 wells.