Key 2023 financial results For reader convenience, amounts in USD were translated at the average exchange rate for the applicable period (average exchange rates for 2022 and 2023 were 460.93 and 456.21 KZT/USD respectively; period‑end exchange rates as of 31 December 2022 and 31 December 2023 were 462.65 and 454.56 KZT/USD respectively).
Revenue
Revenue for 2023 was KZT 8,320 bln (USD 18,236 mln), down 4.3% year‑on‑year. The downward trend was attributable to an 18.4% year‑on‑year decrease in the average Brent crude price.
Share in profit of joint ventures and associates
The share in the profit of joint ventures and associates in 2023 decreased by 46.1% year‑on‑year to KZT 534 bln (USD 1,171 mln) mainly due to a decline in TCO and CPC profit by KZT 402 bln (USD 864 mln) and KZT 53 bln (USD 114 mln) respectively.
Costs
In the reporting period, the cost of purchased oil, gas, oil products and other materials amounted to KZT 4,622 bln (USD 10,131 mln), reflecting a decrease of 6.8% year‑on‑year, which was largely due to a lower average price of oil purchased for resale.
Other expenses
Production expenses went up 6.6% to KZT 1,220 bln (USD 2,674 mln) mainly driven by payroll indexation for employees in the regions of operation, as well as growth of transportation and short‑term lease expenses.
In the reporting period, transportation and selling expenses totalled KZT 246 bln (USD 538 mln), up 19.6% year‑on‑year. The growth was attributable to higher sales of oil by KMG Kashagan B.V. and oil products by KMG International N.V.
General and administrative expenses increased by 10.8% to KZT 178 bln (USD 390 mln) driven by higher payroll expenses and a rise in the provisions for the impairment of accounts receivable under IFRS.
Taxes other than income tax declined by 12.4% to KZT 594 bln (USD 1,302 mln) primarily due to decreases in the rent tax for crude oil exports, mineral extraction tax (resulting from lower oil prices), and export customs duty expenses.
Payroll expenses in 2023 amounted to KZT 612 bln (USD 1.341 mln), showing a 15.6% 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 2023 amounted to KZT 322 bln (USD 706 mln), an increase of 4.6% 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 2023, the loss on impairment of assets for KMG Group amounted to KZT 230.6 bln (USD 505 mln), up 1,058% year‑on‑year (from KZT 19.9 bln or USD 43 mln). Due to negative drilling results at Zhenis, and after receiving a notification by Kazakhstan’s Ministry of Energy on the termination of subsoil use rights for the Aktoty and Kairan fields, a loss on impairment of assets was recognised in the amount of KZT 114.5 bln. KMG International, a subsidiary of the Company, also recognised a KZT 95 bln loss on impairment of property, plant and equipment based on impairment indicators, including high refining margin volatility in the oil and gas market. In June 2023, Petromidia Refinery, a subsidiary of KMG International, had an incident resulting in a partial shutdown of its mild hydrocracker. Following the assessment of the incident, Petromidia Refinery recognised loss on impairment of property, plant and equipment in the amount of KZT 2.7 bln.
Net profit
Net profit demonstrated a 29.2% year‑on‑year decrease to KZT 924 bln (USD 2,026 mln). The decline in the price of oil throughout the reporting year is the primary cause of the decline in net profit.
Net profit for the period attributable to the Parent Company’s shareholders was KZT 960 bln (USD 2,105 mln). The key reason behind the drop in net profit were lower oil prices during the reporting period.
CAPEX
In 2023, CAPEX on an accrual basis in the Company’s segment reporting was KZT 804 bln (USD 1,761 mln). The 50.2% year‑on‑year growth is mainly due to well drilling expenses at Ozenmunaigas and Embamunaigas, replacement of a section at the Uzen–Atyrau–Samara pipeline, and the Astrakhan–Mangyshlak water pipeline upgrade and expansion expenses.
EBITDA
Consolidated EBITDA declined by 21.4% year‑on‑year to KZT 1,995 bln (USD 4,372 mln) compared to KZT 2,536 bln (USD 5,502 mln) in 2022.
Adjusted EBITDA increased by 3.6% to KZT 2,080 bln (USD 4,560 mln) compared to KZT 2,007 bln (USD 4,355 mln) in 2022.
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 segments in 2023 was largely driven by a 21.9% EBITDA decrease in Oil and Gas Exploration and Production resulting from lower average Brent price.
Cash and cash equivalents
Consolidated cash and cash equivalents, including deposits, increased by 5.6% year‑on‑year to KZT 2,112 bln (USD 4,646 mln) as of 31 December 2023. The increase in cash and cash equivalents is mainly due to a positive net cash flow from operating activities in the amount of KZT 1,668 bln (USD 3,655 mln), which was partially offset by CAPEX and payment of dividends to the shareholders. US dollar‑denominated consolidated cash and cash equivalents increased by 7.4% to USD 4,646 mln compared to USD 4,324 mln as of 31 December 2022.
Dividends received
KMG 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 620 bln (USD 1,359 mln) and KZT 462 bln (USD 1,003 mln) in 2023 and 2022 respectively. In 2023, dividends from TCO amounted to KZT 427 bln (USD 936 mln) and from CPC – KZT 114 bln (USD 250 mln).
Dividends paid
In accordance with Samruk‑Kazyna’s resolution dated 30 May 2023, KMG paid KZT 302 bln (USD 679 mln) in dividends, including KZT 300 bln (USD 675 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 is mainly denominated in US dollars – the currency of principal incomes. Accordingly, the “organic” hedging effect of FX risk is achieved without the need to use derivatives.
Total debt
Total debt Excluding guarantees. as of 31 December 2023 was KZT 3,757 bln (USD 8,265 mln), down 9.6% year‑on‑year in tenge terms (down 8% in US dollars).
In April 2023, KMG made full early redemption of USD 500 mln Eurobonds due 2025.
In December 2023, Atyrau Refinery fully repaid a RUB42,371 mln (equivalent to KZT 213,729 mln) loan to VTB Bank, including interest, and partially repaid a loan to Halyk Bank in the total amount of KZT 102,674 mln, including interest.
The total debt decrease was partially offset as KMG International received a USD 307 mln (equivalent to KZT 140 bln) syndicated loan and borrowed USD 101 mln (equivalent to KZT 46 bln) from Bank of Tokyo Mitsubishi UFJ. Ltd and USD 83 mln (equivalent to KZT 38 bln) from Banque de Commerce et de Placements to finance its working capital.
Net debt
Net debt as of 31 December 2023 was KZT 1,645 bln (USD 3,620 mln), down 23.6% year‑on‑year in tenge terms.