KMG EP website

PLANNED PRODUCTION ACTIVITY IN 2012

Crude oil production in PB UMG and EMG in 2012 is planned to be 8.6 million tonnes, including 5.8 million tonnes in UMG and 2.8 million tonnes in EMG. In order to ensure this and compensate for the natural production decline in 2012, the Company is planning to drill 156 oil producing wells and 79 injections wells. In addition to well workovers, the Company will apply bottomhole treatment and will bring some inactive wells back on line.

In the first quarter of 2012 the production of EMG and UMG was about 150 thousand tonnes (7%) behind the plan, primarily due to adverse weather conditions in Western Kazakhstan. Given the 1Q 2012 results, the planned oil production targets may be more challenging than previously anticipated. The Company will do everything possible to meet them but the results of 2Q 2012 will serve as an indicator whether KMG EP will need to adjust its 2012 production forecasts.

In order to ensure the planned production, Company has set the beginning of construction of the following objects in the UMG: two workshops on repair and diagnostics (tubing, rods and deep-well pumps), site preparation for the jamming of the liquid with the equipment, car service center for specialized equipment, site collection and other objects.

The construction of these targets would allow:

  • to eliminate the use of defective equipment;
  • to increase time between repairs of wells by reducing the number of well servicing operations due to sucker rod breakage;
  • to enhance production by reducing the number of well servicing operations and downtime of equipment;
  • to raise the level production safety;
  • to improve sanitary and living conditions of rotational workers which would improve the productivity of labour.

In connection with the events on December 16 in the city Zhanaozen, the Board of Directors of the Company in early 2012 decided to establish two service companies in the Zhanaozen and Aktau citites (PSB «UBR» and LLP «UTTiOS»), which will provide employment for more than 2,000 people. The principal activities of service companies is the implementation of repairs of wells and provision of transport services in UMG and other businesses in the region, which will have a positive impact on maintaining current production levels.

In order to enable service businesses to quickly start their activities, KZT20.6 billion has been allocated, including KZT12.3 billion for operating activities and KZT8.3 billion for capital expenditures. Using these funds in 2012, it is planned to purchase machinery and equipment, as well as to begin construction of two rotational camps and two production bases to service Kalamkas and Karazhanbas fields. Construction of these facilities is necessary for the production activity (workover, transportation services) and provides shift workers with necessary sanitary and living conditions.

In 2012 the capital expenditure of the Company is expected to reach KZT126.5 billion. The Company’s budget will be periodically reviewed to reflect changes in the crude oil price, and foreign exchange and inflation rates, among other factors.