TIDM67LN
JSC National Company Kazmunaygas
16 November 2015
16 November 2015
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF
SUCH JURISDICTION
FUTURE OF RELATIONSHIP AGREEMENT BETWEEN KMG NC AND KMG EP
The Board of National Company KazMunaiGaz ("KMG NC" or the
"Company") has written to the Chairman of KazMunaiGas Exploration
Production ("KMG EP") to propose revisions to the existing
Relationship Agreement ("RA") between the companies to enable KMG
NC to support KMG EP more effectively.
KMG NC has requested that a revised Relationship Agreement
should be considered and endorsed by shareholders of KMG EP at an
EGM in January. KMG NC understands that a revised RA may be
considered a relevant change to the basis on which shareholders
invested and therefore proposes that if they are able to receive
endorsement of a revised RA at an EGM in January, KMG NC would
support a buyback of shares from any shareholder who wishes to sell
their equity within a 60 day period, (i.e. until 26 March
2016).
KMG NC is today publishing the full text of the letter that was
sent to KMG EP to ensure that all shareholders in KMG EP have the
same information about the proposals.
The full text of the letter sent on 9 November is:
Dear Mr. Hopkinson,
KMG EP's recent Q3 results have highlighted again the scale of
the challenges that the company faces in a very difficult economic
environment.
As the majority 63% shareholder, the performance of KMG EP has a
significant impact on KMG NC, and we want to support KMG EP in
addressing the current challenges in the most effective way
possible. We believe this means restoring appropriate control of
KMG EP to KMG NC. This would give KMG EP the benefit of the wider
Group's expertise and experience in key areas, reduce duplication,
improve focus and decision making, and significantly reduce
cost.
The barrier to this is the current Relationship Agreement [RA]
that governs interaction between KMG NC and KMG EP.
This was put in place at the time of IPO to safeguard the
interests of minority shareholders, and we have been strong and
consistent supporters of it. We believe however that in its current
form the RA is now actively detrimental to the interests of
minority shareholders, as it stands in the way of the support that
KMG EP needs from KMG NC.
We therefore believe that the RA now urgently needs to be
revisited, not least in the light of a significantly changed
external operating environment and the fact that a number of
significant terms fall away in 2015, and therefore require
attention to ensure that there is a transparent commercial
understanding upon which minority shareholders can base their
investment decisions.
Revising the Relationship Agreement
The RA gives an important role to the INEDs so we would ask the
KMG EP INEDs to engage in a constructive dialogue with KMG NC INEDs
over a revised RA. Given the urgency of the situation and the
importance of giving KMG EP and its shareholders clarity over the
future direction of the company, we believe that these discussions
should be concluded swiftly, and in any case within 60 days.
As time is of the essence, given that key provisions expire at
the end of 2015, we propose also to ask that your Board calls an
EGM for 26(th) January to consider the outcome of the discussions
on the RA and to endorse a revised RA.
We believe that the interests of all shareholders will be best
served by a RA which will allow NC to exercise appropriate control,
reflecting the size of our shareholding, and recognizing the
embedded state of KMG EP within the KMG Group of companies with
simpler, more cost effective decision making, allowing for lower
operating costs.
For itself, KMG NC intends to retain the highest standards of
corporate governance to continue to protect the interests of
minority shareholders.
Changed circumstance for minority shareholders
We recognize that a revised RA may be considered a relevant
change to the basis on which shareholders invested.
We therefore propose that if we are able to receive endorsement
of the revised RA on this basis at the EGM in January, KMG NC would
support a buyback of shares from any shareholder who wishes to sell
their equity within a 60 day period, (i.e. until 26 March 2016).
The price basis would be an agreed premium over the undisturbed
average share price of the last 30 days, (i.e. from 10 October to
9th November 2015).
As you know, the IPO of KMG NC has already been announced.
Shareholders who support the revised RA would be invited to
register an interest in being considered for a priority allocation
of shares in KMG NC's forthcoming IPO. Such shareholders would also
be entitled to inclusion in the priority even if they choose to
sell their current equity within the 60 days following the EGM
decision.
Clearly if we are not able to agree a revised RA, then we would
not be able to support a buyback or priority at this time. In this
scenario, we will continue to work with KMG EP to try to improve
the company's performance and enable the company to realize the
objectives set out at IPO, notably on exploration and economic
production growth.
We are circulating this letter to all Board members, and would
ask that you also copy it to all shareholders.
I hope we can engage swiftly to resolve these issues and move
forwards to build a stronger KMG Group together.
Yours sincerely,
Frank Kuijlaars
Chairman
JSC KMG NC
Note:
KMG NC, Central Asia's largest oil and gas company, is
Kazakhstan's national oil and gas company in exploration,
production, refining and transportation of hydrocarbons. The
Company accounts for 27% of oil and 14% of gas production in
Kazakhstan and is one of the country's largest employers, with
approximately 80,000 employees. The average production in 2013 was
573.8 kboed of crude oil with a strong refinery throughput of 323.6
kboed and proven reserves of 8.7 bnboe. The Company represents the
Government's interests in the oil and gas sector and is 100% owned
by "Samruk-Kazyna" JSC, Kazakhstan's sovereign wealth fund. Through
joint ventures KMG NC has equity in 38 oil & gas related
companies in Kazakhstan and abroad.
Enquiries:
Media enquiries:
Portland Communications
Oliver Pauley +44 (0)207 554 1608
This announcement does not constitute an offer or invitation to
purchase any securities. Any offer (if made) will be made solely by
certain offer documentation which will contain the full terms and
conditions of any such offer (if made) and details of how to accept
it.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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November 16, 2015 05:04 ET (10:04 GMT)
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