Key 2022 financial resultsFor reader convenience, amounts in USD were translated at the average exchange rate for the applicable period (average exchange rates for 2022 and 2021 were 460.93 and 426.06 KZT/USD, respectively; period-end exchange rates as of 31 December 2022 and 31 December 2021 were 462.65 and 431.80 KZT/USD, respectively).

Revenue

Revenue for 2022 was KZT 8.686 bln (USD 18.845 mln), up 34.5% year-on-year. The upward trend was mainly attributable to the growth of Brent crude price by 42.9% year-on-year, tenge’s depreciation against US dollar by 8.2% year-on-year.

Share in profit of joint ventures and associates

The share in profit of joint ventures and associates in 2022 increased by 45.7% year-on-year to KZT 991 bln (USD 2.151 mln) mainly due to rising profit of Tengizchevroil by KZT 301 bln (USD 575 mln).

Costs

The cost of purchased oil, gas, oil products and other materials in the reporting period amounted to KZT 4.954 bln (USD 10.749 mln), up 37.3% year-on-year. This was largely due to an increase in crude oil and oil products prices.

Other expenses

Production costs in 2022 increased by 58.4% year-on-year to KZT 1.142 bln (USD 2,478 mln), driven, among other things, by growing payroll expenses across KMG’s footprint.

Transportation and selling expenses totalled KZT 205 bln (USD 445 mln), up 11.9% year-on-year.

General and administrative expenses increased by 5.8% to KZT 160 bln (USD 347 mln) due to growing payroll expenses across KMG’s footprint.

Taxes other than income tax went up by 47.0% to KZT 678 bln (USD 1.471 mln) mainly as a result of increased expenses on rent tax owing to higher oil prices and excise tax expenses.

Payroll expenses in 2022 amounted to KZT 528 bln (USD 1.145 mln), showing a 33.0% increase year-on-year, and were reflected in production expenses, transportation and selling expenses, and general and administrative expenses in the consolidated statement of comprehensive income.

Finance costs in 2022 amounted to KZT 307 bln (USD 666 mln), an increase of 16.8% year-on-year, mainly due to growing interest expense on loans and bonds amid weaker tenge and marginally higher interest rates.

Impairment of assets

According to the assessment of 2022, the loss on impairment of assets amounted to KZT 0.7 bln (USD 1.5 mln), down 96.6% year-on-year (from KZT 21 bln or USD 49 mln). The amount of loss on impairment includes a KZT 1.8 bln (USD 3.9 mln) impairment recorded for Barys, Berkut, Beket Ata and Turkestan vessels, and an impairment of minus KZT 1.1 bln (minus USD 2.4 mln) for other assets. The loss on impairment of assets was significantly lower in 2022 as KMG International recognised loss on impairment of property, plant and equipment based on the results of the audit of property, plant and equipment and undertook an impact assessment of the fire incident at the Petromidia Refinery (a subsidiary of KMG International) and recorded the loss on impairment of Petromedia’s property, plant and equipment.

Net profit

Net profit for the period was KZT 1.317 bln (USD 2.858 mln) compared to KZT 1.287 bln (USD 3.020 mln) in 2021.

Net profit for the period attributable to the Parent Company’s shareholders was KZT 1.289 bln (USD 2.797 mln).

CAPEX

In 2022, CAPEX on an accrual basis in the Company’s segment reporting was KZT 535 bln (USD 1.161 mln), representing a 13.4% increase year-on-year – mostly in Oil and Gas Exploration and Production.

EBITDA

Consolidated EBITDA increased by 25.9% year-on-year to KZT 2.538 bln (USD 5.505 mln) compared to KZT 2.015 bln (USD 4.730 mln) in 2021.

Adjusted EBITDA increased by 14.8% to KZT 2.009 bln (USD 4.358 mln) compared to KZT 1.750 bln (USD 4.108 mln) in 2021.

Given the vertically integrated operations of KMG, we analyse EBITDA broken down by the segments below. We analyse and report segmented information according to IFRS. Segment performance is evaluated based on revenues and net profit. The operating segments of KMG Group are structured and managed in a manner corresponding to the relevant types of products and services and encompass the strategic lines of business for different products and markets. The Company’s operations comprise four main operating segments: oil and gas exploration and production, oil transportation, refining and sales of crude oil and oil products, KMG’s Corporate Centre, etc. (oilfield service companies and other insignificant companies). KMG presents the Corporate Centre’s activities separately, since KMG not only performs the functions of the parent company, but is also involved in operations (processing of crude oil at Atyrau and Pavlodar refineries, and further sale of oil products to both domestic and export markets).

The improvement in EBITDA by segment in 2022 was largely driven by an EBITDA increase of KZT 394 bln (USD 597 mln) in Oil and Gas Exploration and Production, and of KZT 169 bln (USD 315 mln) in Refining and Sales of Crude Oil and Oil Products amid higher crude oil and oil product prices.

Cash flows

Cash and cash equivalents

Consolidated cash and cash equivalents, including deposits, increased by 13.5% year-on-year to KZT 2.000 bln (USD 4.323 mln) as of 31 December 2022. The increase in cash and cash equivalents is mainly due to a positive net cash flow from operating activities in the amount of KZT 1.567 bln (USD 3.400 mln), which was partially offset by an outflow of cash attributable to the acquisition of KMG Kashagan B.V.’s shares and payment of dividends to the shareholders. US dollar-denominated consolidated cash and cash equivalents increased by 5.9% to USD 4.323 mln compared to USD 4.082 mln as of 31 December 2021.

Dividends received

The Company is a parent company of the Group and receives dividends from its subsidiaries and associates, JVs and associated companies. The Company received dividends in the amount of KZT 462 bln (USD 1.003 mln) and KZT 415 bln (USD 975 mln) in 2022 and 2021, respectively. In 2022, dividends from Tengizchevroil amounted to KZT 208 bln (USD 451 mln), from Caspian Pipeline Consortium – KZT 99 bln (USD 214 mln), and from Mangistau Investment B.V. – KZT 92 bln (USD 200 mln).

Dividends paid

In accordance with Samruk-Kazyna’s resolution dated 20 June 2022, KMG paid dividends in the amount of KZT 202 bln (USD 438 mln), including KZT 200 bln (USD 434 mln) of dividends paid to Samruk-Kazyna and the National Bank of the Republic of Kazakhstan.

Debt management

KMG’s total debt is represented by bonds and loans. The debt portfolio mainly denominated in US dollars – the currency of core earnings. Accordingly, the “organic” hedging effect of FX risk is achieved without the need to use derivatives.

Total debt

Total debtExcluding guarantees. as of 31 December 2022 was KZT 4.143 bln (USD 8.956 mln), up 10.6% year-on-year in tenge terms (up 3.2% in US dollars) as a result of a KZT 751.6 bln bond placement to finance part of the share buyback in KMG Kashagan B.V.

To reduce the impact of FX risk on the Company’s leverage, we entered into a deal to refinance a loan.

In January 2022, Atyrau Refinery made a full early repayment of a USD 604 mln (KZT 259 bln) loan from Eximbank, including interest. The loan was repaid using cash reserves created in November 2021.

In September 2022, the Company placed KZT 751.6 bln of bonds with a coupon of 3.0% per year and a maturity date in 2035. The bonds were purchased by Samruk-Kazyna as part of the deal to buy shares in KMG Kashagan B.V.

As of 31 December 2022, debt owed to Samruk-Kazyna was primarily attributable to the exercise of the Option totalling KZT 165 bln. The Company’s total debt, including the above outstanding amount owed to Samruk-Kazyna in connection with the exercise of the Call Option to buy back a stake in Kashagan, stood at KZT 4.308 bln (USD 9.312 mln).

Net debt

Net debt as of 31 December 2022 was KZT 2.143 bln (USD 4.632 mln), up 8% year-on-year in tenge terms.