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S&P: Capital expenditure of KazMunaiGas to reduce to $1.3B

Finance Materials 10 November 2018 12:37 (UTC +04:00)

Baku, Azerbaijan, Nov. 10

By Rashid Shirinov – Trend:

S&P Global Ratings expects capital expenditure of Kazakhstan’s national oil company KazMunaiGas NC JSC (KMG) to reduce to about $1.3 billion in 2018 and $1.1 billion in 2019-2021 after completion of key projects.

“This should generate positive free operating cash flow of $0.9 billion-$1.1 billion annually,” the ratings agency said.

S&P Global Ratings raised its ratings on KMG to 'BB' from 'BB-'. The outlook is stable. The national scale rating on KMG was also raised to 'kzA+' from 'kzA'.

The improvement will come from the combination of favorable oil prices, an expected increase in gas exports, cost savings, stabilization of capital expenditure, and greater cash centralization at KMG.

S&P Global Ratings expects KMG's EBITDA (earnings before interest, taxes, depreciation, and amortization) to increase to somewhat above $3 billion in 2019-2020, thanks to favorable oil prices, increasing gas exports to China, cost optimization, and about $0.5-0.6 billion of dividends annually from all its joint ventures.

“Uncertainties related to KMG's financial policy, notably with regards to the $4.7 billion Kashagan option, potential capital expenditure projects, and potential exposure to weak local banks, remain the key constraint on the rating and stand-alone credit profile,” the ratings agency noted.

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