Atyraumunaigasgeologya OJSC (Kazakhstan): General information, characteristics of activities

/IRBIS, July 11, 01/ - Following information about Atyraumunaigasgeologya OJSC (AtMMG OJSC, Atyrau) was borrowed from the conclusion of the Kazakhstan Stock Exchange (KASE) Listing commission, which is devoted to the admittance of first issue inscribed coupon bonds of the company (KZ2C4AUC1A24, AMGGb1; $100, $1m, Jan 15.01 - Jan 15.02, semiannual coupon at 12.0% APR) to the official list of the KASE securities under category "B". Based on the data of the issuer, the funds, raised by the bond issue, are to be used to conduct additional survey and development of Airankol hydrocarbons site (Jylyoi district of Atyrau region). The management of AtMMG OJSC and its financial consultant, Asia Business Consulting OJSC (Almaty), are liable for the reliability of the information presented by the KASE Listing commission. GENERAL INFORMATION Date of initial state registration - March 6, 1996. Legal status - Open Joint Stock Company. Ownership - private. Legal and actual address - 4, Azattyk Ave., Atyrau, 465002, Kazakhstan. Primary activities - offering drilling geological survey works and hydrocarbons extraction services. Primary services - survey, drilling, well repair services at oil and gas fields. The number of employees as of January 1, 2001 (based on the list) - 595, including 28 managers, 57 specialists, 6 employees, 504 workers. AtMMG OJSC has a state license of the Ministry of Energy, Industry and Trade of Kazakhstan to use industrial highly explosive and flammable production facilities, dated June 22, 2000. CHARACTERISTICS OF ACTIVITIES AtMMG OJSC is a private company without subsidiaries. The main block of shares (76.54%) belongs to MTA SECURITIES & INVESTMENT LIMITED (Tortola, British Virgin Island). The core of the business is the participation in service offering tenders: exploration of oil and gas fields, drilling and repairing the wells. All major contracts were won by the company at tenders. Total amount of all contracts signed in 2001 is about $4m. Following is a brief characteristics of existing contracts. ------------------------------------------------------------------------------- Customer: KaspiiNeft OJSC Type of works: testing and preliminary exploitation of exploratory well Airankol #2,16,22 Contract value: KZT23,468,602 Contract term: from 2000 till the completion of works Payment term: monthly, based on acts of works done --------------- -------------------------------------------------------------- Customer: Sazankurak JV Type of works: drilling of exploratory wells SK-3, SK-4 "at a daily rate" with the depth of 600 m Contract value: $150-180 th. Contract term: from Sept 08.00 through Dec 31.01 Payment term: monthly, based on acts of works done --------------- -------------------------------------------------------------- Customer: North Caspian Oil JV Type of works: drilling of exploratory well Taskuduk FX-1 " at a daily rate " Contract value: $180-200 th. Contract term: from Oct 17.00 during 6 months from the drilling starting date Payment term: monthly, based on acts of works done --------------- -------------------------------------------------------------- Customer: BN-Munai LLP Type of works: drilling of exploratory well Akkulovskaya-5 Contract value: $2,100 th. Contract term: from Dec 15.99 through Aug 20.01 Payment term: installment payment --------------- -------------------------------------------------------------- Customer: BN-Munai LLP Type of works: drilling of exploratory well Akkulovskaya-6 Contract value: $1,900 th. Contract term: from Sept 28.00 through Nov 31.01 Payment term: installment payment --------------- -------------------------------------------------------------- Customer: Med Shipping Usturt Petroleum Type of works: major overhaul of exploratory well Begesh-1 Contract value: $600 th. Contract term: from Sept 08.00 till the completion of the works at the well Payment term: monthly, based on acts of works done ------------------------------------------------------------------------------- Production and inventory bases Transportation-grouting base (TGB) of AtMMG OJSC allows it to meet all the company's own requirements in cargo transportation, as well as to offer services to other companies. Based on the specifics of the works, TGB has two components - automobile and grouting. The automobile part deals with corresponding services during the construction of the wells. Grouting part deals with the cementing during the fixing of the wells, pressure testing the equipment, casing and exploitation strings, cement bridges, installing cement bridges, insulating and liquidatory and other works. Central engineer-technological service drills the wells, test them conducts major overhaul and underground repairworks, repairs drilling equipment and derrick mounting works. Particularly, drilling equipment division repairs the rotor, winch, swivel, rotary pump, diesel engines, power stations, mobile drilling wrenches, and others, derrick mounting unit mainly deals with construction of derricks (mounting and demounting stationary and mobile drilling equipment). Atyraumunaigasgeologya-service administration offers such services as the repair of the parts of drilling equipment, machinery, mobile houses, makes switches and non-standard equipment, accepts and processes different cargo, carpentry works, welding and other works. It consists of Repair-rolling workshop, Atyrau production base and Dengiz byrail unit. Wearout degree of AtMMG OJSC assets as of January 1, 2001 ---------------------------------------------------------------- Initial value, Accrued Average th. KZT depreciation, wearout, Item th. KZT % ----------------------- -------------- ------------- -------- Buildings 21,030 8,577 41 Machinery and equipment 167,360 108,887 65 Vehicles 89,226 48,672 55 Others 28,225 8,058 29 ---------------------------------------------------------------- Suppliers Main suppliers of the materials and equipment to AtMMG OJSC are the enterprises of Russia and Ukraine: - Volgoburmash OJSC - Russian enterprise producing main well drilling equipment for oil, gas and mining industries; - Volzhskii trubnyi zavod (Pipe plant) - major metallurgical enterprise in Russia producing seamless and electric welding spiral-seamed pipes; - Concern Nadra - Holding of Ukrainian companies specializing in offering services in exploration and extraction of hydrocarbons, development of scientific-geological programs, as well as the production of drilling and logging equipment; - Izhneftemash OJSC - major Russian machinery enterprise producing oil producing equipment. Competitors Based on the information of AtMMG OJSC, presently only a few companies offer the services similar to those of the company in Kazakhstan: - Prikaspiiburneft (Russia, middle drilling; distinguished by a relatively expensive mobility and absence of powerful production and technical base); - Kazakhoilburenie (Kazakhstan, middle drilling; mainly works for one customer - NOC KAZAKHOIL CJSC, which limits its abilities to participate in the tenders conducted by oil companies for drilling works, mainly specializes in industrial drilling); - Parker Drilling (USA, deep drilling; contractors - only OKIOC, Chevron and Japanese national oil company, specializes solely on deep drilling, does not participate in tenders). Development strategy Presently, long-term strategy of AtMMG OJSC is the participation in the development of Airankol field to receive a profit from selling this oil based on mutual cooperation agreement "On the development of Airankol field" with KaspiiNeft OJSC. The contract, signed on September 11, 2000, was based on mutual development and exploitation of Airankol field, which is under development already. The contract term is 3 years. Based on its terms, AtMMG OJSC ensures a quality work in testing and preliminary exploitation of the exploration wells based on the project and work plan, as well as assumes obligation to finance the development of Airankol field independently, which would require $1m. For the part of KaspiiNeft OJSC, it should provide AtMMG OJS with detailed plan of testing and preliminary exploitation works, and assumes an obligation to sell the oil obtained as a result of the tests and exploitation. KaspiiNeft OJSC is the owner of the license on mineral resources use under this project. The license was issued by the Ministry of Energy and Mineral Resources of Kazakhstan to use the mineral resources and explore hydrocarbons at Airankol field on October 10, 1997 for 5 years. The oil from Airankol field is sold on domestic market. Main consumers are ANPZ OJSC, NOTC KazTransOil CJSC, Mercury LLP, Munai Impex. Airankol oil field is located in Southern-Eastern part of Caspian valley. Based on administrative division, it is a part of Jylyoi district of Atyrau region of Kazakhstan. Within western semiarch of the southern wing of the structure Apt, I and II Neocom horizons have been discovered. The oil reserves within the horizons are distributed as follows: - Apt: I horizon - balance reserves 976.1 th. tons, extractable - 195.2 th. tons; II horizon - balance reserves 786.1 th. tons, extractable - 157.2 th. tons. - Neocom: I horizon - balance reserves 2,646.8 th. tons, extractable - 529.4 th. tons; II horizon - balance reserves 2,352.7 th. tons, extractable - 470.5 th. tons. At the outset of the project major overhaul will be conducted at 7 wells and they will be re-activated at Airankol field, as well as two exploitation wells will be drilled with further use through pumping station at Koschagyl OJSC field. Average daily output of one well is 9.1 tons a day, and the production volume of oil is at 22,932 tons a year. Profitability of the project is estimated as follows: ---------------------------------------------------- Annual oil production: 22,932 tons Price per ton of crude oil: $120 Sales income: $2,751,840 Demulsyphication expenses compensation: $218,400 Plant's processing expenses: $436,800 Bond maturity expenses: $1,120,000 Securities transaction tax expenses: $1,000 Listing fees to KASE: $1,000 Income before tax: $974,640 VAT 20%: $550,368 Excise and royalty: $144,471 Income tax at 30%: $83,940 Net income: $195,861 ----------------------------------------------------