SHAHARMUNAIGAS OJSC (Kazakhstan): brief characteristics

/IRBIS, Jan 25, 01/ - Following is brief characteristics of SHAHARMUNAIGAS OJSC (company), prepared by the IRBIS specialists on the basis of the materials of the Listing commission of the Kazakhstan Stock Exchange (KASE), SHAHARMUNAIGAS OJSC and issue prospectus of the bonds that were registered by the National Securities Commission of Kazakhstan (NSC). The characteristics is published due to the entering the first issue bonds of SHAHARMUNAIGAS OJSC into official list of the KASE securities under category "A". The management of SHAHARMUNAIGAS 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 - Nov.3, 00. Legal status - open joint stock company. Ownership - private. Legal and actual address of the head office - 124, Furmanov St., 480091, Almaty, Kazakhstan. Number of employees - 21. PRIMARY ACTIVITIES, MEMBERSHIP Primary activities of the company: exploration, extraction and sale of hydrocarbons and oil products; building and exploitation of gas stations and hydrocarbons and oil products storage facilities. BRIEF HISTORY Shaharmunaigas LLP (Almaty) was founded on July 26, 2000 as a result of the reorganization of TUMA LLP (Almaty) and becomes its successor. TUMA LLP was founded on November 16, 1997 by Shahar-Holding CJSC (Almaty), which was founded earlier on November 3, 1997. After the reorganization of TUMA LLP the subsidiary Universalnaya Baza TUMA OJSC (UB TUMA OJSC, Boraldai comm., Ili district of Almaty region) came out of its structure. On November 3, 2000 Shaharmunaigas LLP was re-registered as SHAHARMUNAIGAS OJSC. Before these events 80% of TUMA LLP authorized capital was controlled by Shahar-Holding CJSC, 20% by an individual, a citizen of Kazakhstan. After the re-registration the Munaigas OJSC, founded on July 10, 1997 and re- registered as Munaigas OJSC, became the only founder of the Shaharmunaigas LLP. Shaharmunaigas LLP was founded by the Munaigas OJSC to conduct oil exploration, settlement and extraction works at Kultuk deposit site. LICENSES AND CONTRACTS FOR MINERAL RESOURCE USE SHAHARMUNAIGAS OJSC presented a copy of the license issued on December 8, 1997 by the State committee on investments of Kazakhstan to Munai CJSC to explore and extract hydrocarbons at Kultuk oil deposit site to the KASE. The site is located in Beineu district of Mangistau region. Along with the license geological allotment was obtained with the area of 79.8 square km. Moreover, there is a contract between the State committee on investments of Kazakhstan and the Munai CJSC to extract and explore hydrocarbons at Kultuk deposit site (the Exchange has a copy of the state registration act of the contract). The registration date of the contract is June 24, 1998. The contract was signed for 30 years. It went into effect on June 24, 1998 and expires on the last day of the license, i.e. on December 8, 2027. By the agreement signed between the Investment agency of Kazakhstan and the SHAHARMUNAIGAS OJSC on May 30, 2000, the changes were made into the contract due to the re-registration of the Munaigas CJSC as Munaigas OJSC. On July 26, 2000 Munaigas OJSC passed the mineral resources use rights to its subsidiary company, Shaharmunaigas LLP, that is making it a contractor. The letter of the Investment agency of Kazakhstan, dated December 11, 2000, received by the KASE in response to corresponding inquiry, confirms the proprietary rights of the SHAHARMUNAIGAS OJSC on Kultuk deposit site and the use of these rights in compliance with existing law as a collateral for the bond issue. CHARACTERISTICS OF THE RAW MATERIAL BASE, RESERVES Kultuk deposit site is located on the Caspian Sea coast in Beineu district of Mangistau region of Kazakhstan. Fifty kilometers to the north of it there is Prorva site, which is currently developed, and Sarykamys community, and 150 kilometers to the East - railroad station Beineu. As a result of exploration works conducted at the site in the 70's two oil and gas horizons, located on Jurassic sedimentation, have been discovered. The first (Callovian) horizon was tested with 8 wells, and industrial oil outflows were obtained from two wells. The oil outflow of the well 3 reached 110 cubic meters (about 90 tons a day), from the well 5 - 172 cubic meters (about 140 tons a day), the well 8 was liquidated without any testing. The second (Bajocian) horizon was tested with 4 wells. The oil outflow was obtained in one well and reached 12.6 cubic meters (10.3 tons a day). Further works at the deposit site have been halted because only big and unique sites had been put into operation in the Soviet Union. The oil reserves of the category C1 at Kultuk deposit site have the following parameters: I - Callovian horizon. - depth of water and oil contact from the surface - 2,893 m; - block area - 10,725 square km; - effective capacity of the bed - 5.7 m; - geological reserves - 3,808 th. tons; - extractable reserves - 1,143 th. tons. II - Bajocian horizon. - depth of water and oil contact from the surface - 3,202 m; - block area - 14,500 square km; - effective capacity of the bed - 4.9 m; - geological reserves - 3,449 th. tons; - extractable reserves - 1,034 th. tons. Total oil reserves with the current study level reach 7,257 th. tons, including 2,177 th. tons of extractable. When calculating extractable reserves the oil extraction coefficient (OEC) of 0.3 was used. This figure corresponds to average values obtained during the development of the deposit sites of this region. These oil reserves, which are typical to small deposit sites, were approved by the protocol of the Central committee on the reserves of the Ministry of Geology of the USSR on February 28, 1984. The existence of oil reserves was confirmed by the certificate issued to Munaigas OJSC by the State commission on the reserves of the geology and mineral resources protection committee of the Ministry of Natural resources and environment protection of Kazakhstan on August 4, 2000. The certificate contains the value assessment of the reserves: at $50 per tone ($7 per barrel) it equals $109 mln. The oil form this deposit site has a relatively high quality for this region, that it low content of paraffin (first horizon - 1.2%, the second - 2.37%) and sulfur (the first horizon - 0.18%, the second - 0.44%). CAPITAL AND SHAREHOLDERS As of December 1, 2000 announced and paid authorized capital of SHAHARMUNAIGAS OJSC equaled KZT3,625,000. Total of 3,625 common inscribed (KZ1C424404X9) shares were issued with KZT1,000 face value. The share issue was registered with the NSC on Nov.22, 00 under the number A4344. The floatation report was approved by the NSC on Nov.24, 00. The issuer's register is maintained by the Fondovyi tsentr OJSC (Almaty). Based on the data of the IRBIS, the shares of SHAHARMUNAIGAS OJSC have never been traded by brokerage and dealing companies on organized and over-the-counter market of Kazakhstan, and there is no market value of the shares. All shares of SHAHARMUNAIGAS OJSC belong to Munaigas OJSC. As of the state re-registration date (November 3, 2000), 25% of announced authorized capital of the SHAHARMUNAIGAS OJSC has been formed and paid. The authorized capital was fully paid on November 22, 2000. The main activities of the Munaigas OJSC, the parent company of the SHAHARMUNAIGAS OJSC, are the development, extraction, processing and sale of hydrocarbons, as well as building and exploitation of storage and reloading facilities for oil products. The Munaigas OJSC has the license 1013, issued by the government of Kazakhstan on December 4, 1997 to explore and extract hydrocarbons at Imashev gas condensate site in Atyrau region. The license was issued for 40 years. On March 16, 2000 the Munaigas OJSC signed a contract on the use of mineral resources with the Investment agency of Kazakhstan. Imashev deposit site is the second largest (after Karachaganak) gas field in Kazakhstan. Approved reserves are 128.7 bln cubic m of gas and 20.7 mln tons of gas condensate. The deposit site is located in Atyrau region at the border of Russia and adjacent to currently developed Astrakhan gas deposit site. CHARACTERISTICS OF THE ACTIVITIES Neither the Munaigas OJSC, or SHAHARMUNAIGAS OJSC have done any work at Kultuk deposit site. No significant investments have been made into the site. In 1998 and 1999 the companies made an inventory of the wells, developed rehabilitation projects for the sites and environmental insurance. IMPORTANT DEVELOPMENT PROJECTS Within 5-year circulation period of his first issue bonds the SHAHARMUNAIGAS OJSC plans to put into service four wells, which have been drilled already at Kultuk site, and drill another two wells. During the whole contractual term (30 years) the company plans to extract all approved oil reserves. During the circulation period of the bonds 687,960 tons of oil is to be extracted, which is 32% of initial approved extractable reserves. The maximum oil production (101,920 tons) should be achieved in the seventh half-year period of the project, when all 6 wells will be put into service. The main oil extraction method is fountain method with subsequent switching to depth pumping. The main method of oil extraction increase is the pumping the accompanying water back into the wells. The extracted oil is to be transported to Prorva deposit site (Sarykamys community), which is connected to the NOTC KazTransOil CJSC oil pipeline system. At the beginning stages of the project oil will be transported to Prorva deposit site by cars. Then, the oil will be supplied through Kultuk - Sarykamys oil pipeline stretching for 55 km. This pipeline is to be built by the SHAHARMUNAIGAS OJSC during the first two years of the project. Based on the company's information, the main transportation expenses to Prorva deposit site will be born by the buyers of the oil. Calculations of cash flows during the circulation term of the bonds have been made by the SHAHARMUNAIGAS OJSC on the basis of $16.4 per barrel or $120 per ton price. Total revenues are expected at $126.1 mln, total expenses at $108.1 mln. Twenty four percent of the revenues ($30 mln) should come from the floatation of the bonds, 65% ($82.6 mln) - from the oil sales. Production expenses and wage fund should equal 47% ($51.5 mln) of all expenses, 46% ($49.6 mln) should be used to pay the coupons on the bonds and the repayment of the loan. At expected price of $16.4 per barrel planned revenues should exceed the expenses by $18.1 mln.