Kazakh oil firm under pressure from state-owned parent

Wed Apr 20, 2016 3:17pm GMT

By Olzhas Auyezov and Mariya Gordeyeva

ALMATY, April 20 (Reuters) - Minority shareholders in Kazakhstan's biggest listed oil company, Kazmunaigas Exploration and Production, say the state-owned parent company is impinging on their interests in a drive to squeeze cash out of the firm.

The dispute is part of a global pattern of oil producing states quarrelling with foreign investors as low oil prices leave a dwindling pot of money for them to share out.

Floated 10 years ago, Kazmunaigas Exploration and Production (KMG EP) enjoys a high degree of autonomy from its parent, national oil company Kazmunaygaz (KMG NC), because it has three powerful independent directors on its board.

KMG NC, fully owned by the government, has a 58 percent stake in KMG EP, while minority shareholders, including China's sovereign fund, China Investment Corporation, and funds run by managers such as BlackRock, own 34 percent.

The heavily indebted parent narrowly averted default last year, when Kazakhstan's central bank effectively printed the equivalent of $4 billion to bail it out. Meanwhile, upstream-focused KMG EP was sitting on a cash pile worth more than $3 billion accumulated during a decade of high oil prices.

According to people close to two minority shareholders in the listed firm, the parent company is using a variety of tactics to squeeze the operations and finances of KMG EP.

"They see the company has money and they want to take it. Of course, this is not how partners are supposed to behave," said one minority shareholder who spoke on condition of anonymity.

Kazmunaygaz did not reply to a request from Reuters for comment. China Investment Corporation and BlackRock declined to comment.   Continued...

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