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TCO performance results for 2020: oil production decline to 26.5 million tons, social investments - $ 27 million.

12 April, Monday

On April 1, 2021, Tengizchevroil LLP (TCO) published results of its activities in the field of environmental protection, employees and support of Kazakhstani content [1]. Earlier in February, the company released its business performance results for 2020 [2].

According to published data, the company produced 26.5 million tons of crude oil in 2020. According to the JSC "Information and Analytical Center for Oil and Gas" [3], the total volume of crude oil production in Kazakhstan in 2020 amounted to 82.1 million tons. Thus, TCO accounted for over 32% of crude oil production in Kazakhstan in 2020. At the same time, relative to 2019, the company reduced oil production by 11.2%, which is consistent with the requirement to reduce production in the country under the OPEC + Agreement.

Of the three largest oil and gas producing companies in Kazakhstan (TCO, KPO and NCOC), TCO was the only one that reduced production last year. KPO, as a result of specific accounting, namely the definition of all oil and gas condensate produced by KPO only as "gas condensate" by the Bureau of National Statistics of the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan, which is the source on which foreign information providers of the OPEC Secretariat rely. As a result, the company was not limited in production volumes and increased it by 7.8% in 2020.

NCOC, despite a decline in production from May to December, still received more oil in 2020 than a year earlier, due to higher production levels from January to May, prior to the release of the Republic of Kazakhstan Resolution on production cuts.

Regarding TCO's financial results, the company only mentioned the volume of tax payments, “over $6.6 billion in direct payments to the Republic of Kazakhstan (RoK)”. In terms of the purchase of Kazakhstani goods, works and services, TCO notes investments for $3.5 billion in local suppliers.

However, it is assumed that due to the coronavirus epidemic, falling demand for fuel and world oil prices, TCO recorded a decrease in revenue last year, like JSC “National Company “KazMunayGas” (KMG) and other world oil and gas companies. In the consolidated financial statements of KMG [4] published on March 15 of this year it is noted that its “share in the profits of joint ventures and associated companies for 2020 decreased by 38.3% to 511 billion tenge (USD 1,236 mln), mainly as a result of lower profits of Tengizchevroil LLP (TCO), Mangistaumunaigas JSC and KMG Kashagan B.V. The financial report of KMG also states that “the share in the net
profit of TCO in the reporting period decreased by 58.2%, amounting to 173 billion tenge (USD 420 million)”.

In general, for 2020, KMG recorded a decrease in revenue by 33.6%, a drop in profit by 85.2% to 172 billion tenge (USD 416 mln), while the company's net debt increased by 9.9% to 2.6 trillion tenge, financial EBITDA decreased by 41.3% to 1.15 trillion tenge (USD 2,785 mln). According to the report, the deterioration of the company's financial performance is associated with a drop in oil prices, a decrease in oil sales volumes due to production restrictions under the OPEC + Agreement and "a decrease in the volume of trading and sales of petroleum products by KMG International".

 

In the consolidated financial statements of KMG, EBITDA equals Revenue plus Share in profit of JVs and associates, net, minus Cost of purchased oil, gas petroleum products and refining costs minus Production expenses minus General and administrative expenses minus Transportation and selling expenses minus Taxes other than income tax.

The world's major oil and gas giants also recorded significant revenue losses in 2020. Cumulative revenues of 14 of the world's largest publicly traded oil companies, including American ExxonMobil, Chevron, ConocoPhillips, Halliburton, Schlumberger, Baker Hughes and France's Total, Royal Dutch Shell, Britain's BP, Italy's ENI, Norway's Equinor, Russia's Lukoil, Rosneft and Saudi Arabia's oil company, in 2020 decreased by 35.4%, according to data from the agency Anadolu [5] based on the financial results of the companies.

ExxonMobil published an annual report [6], which noted that, in 2020, the company reduced oil and gas production by only 4.8% to 3.76 million barrels of oil equivalent (boe) per day, while simultaneously receiving a loss from the Upstream sector - $ 20.0 billion, compared with a profit of $ 14.4 billion in 2019. In general, from all activities in 2020 the company received a loss of $22.4 billion, while in 2019 it made a profit of $14.3 billion.

BP [7] also made huge losses of $20.3 billion to shareholders in 2020, compared to $4.0 billion in profit in 2019. The company reduced production in 2020 by only 9.9% to 2.375 million boe per day, while the loss before taxes and interests from the upstream sector in 2020 amounted to $ 21.5 billion against $ 4.9 billion in profit before taxes and interests in 2019.

British-Dutch Shell [8] incurred a significant loss of $21.5 billion in 2020, compared with a profit of $ 16.4 billion in 2019. The decline in production of crude oil, natural gas and liquefied natural gas in 2020 was only 7.6% to 3.4 million boe per day, the company received losses from the sale of raw materials in the amount of $10.8 billion, against revenues of $3.9 billion in 2019. Liquefied natural gas (LNG) sales have become unprofitable ($6.3 billion loss in 2020), while previously earning revenue was $8.6 billion in 2019. Sales of petroleum products went negative to $494 million loss against revenue of $6.1 billion in 2019.

Like other large companies in Kazakhstan, TCO carries a certain social burden. In the area of ​​environmental and employees protection, support for Kazakhstani content, the company said that in 2020, as a result of TCO's cooperation with state authorities to combat the coronavirus pandemic, “KZT 4.5 billion worth of medical equipment, supplies and capabilities” were sponsored [9]. The company also spent about $27 million on other projects for the development of social infrastructure in Atyrau and Mangistau regions.

 

Tengizchevroil LLP is one of the largest oil and gas companies in the Republic of Kazakhstan, producing oil, gas and sulfur. According to JSC “IACOG”, last year the company exported more than 26 million tons of oil, which is almost 100% of the company's production in 2020. The company's facilities also produce liquefied petroleum gas, which is subsequently sold by the company, also mainly for export.

Today, most of the company's shares are owned by foreign partners. The majority shareholder of the company is American Chevron (50%), followed by a company with American capital ExxonMobil Kazakhstan Ventures Inc. (25%) (in the annual report of ExxonMobil, it fully accepts all 25% in TCO), followed by the Kazakh national company JSC “NC “KazMunayGas” (20%) and the Russian LukArco (5%).

It should be noted that in 1993 TCO was established on the basis of an agreement between the American corporation Chevron and the government of the Republic of Kazakhstan, with a profit sharing 80.6% for Kazakhstan and 19.4% for Chevron corporation [10].

 

List of sources used:

1.      Tengizchevroil LLP (2021) «Tengizchevroil published its 2019 and 2020 Corporate Responsibility Report», from 01 April 2021, http://www.tengizchevroil.com/en/about/media/tconews/item/tco-stories/2021/04/01/tengizchevroil-published-its-2019-and-2020-corporate-responsibility-report

2.      Tengizchevroil LLP (2021) «Tengizchevroil announces 2020 year-end results, http://www.tengizchevroil.com/en/about/media/tconews/item/tco-stories/2021/02/23/tengizchevroil-announces-2020-year-end-results

3.      The Joint Stock Company "Information and Analytical Center of Oil and Gas", http://www.iacng.kz/en/

4.      JSC “NC “KazMunayGas” (2021) «JSC NC KazMunayGas announces 2020 FY financial results», from 15.03.2021,  https://www.kmg.kz/eng/press-centr/press-relizy/?cid=0&rid=358

5.      Anadolu Agency (2021) «Revenues of oil giants decline 35.4% in 2020» от 26 марта 2021г., https://www.aa.com.tr/en/economy/revenues-of-oil-giants-decline-354-in-2020/2188714 

6.      ExxonMobil (2021) « ExxonMobil 2020 Annual Report», https://corporate.exxonmobil.com/-/media/Global/Files/investor-relations/annual-meeting-materials/annual-report-summaries/2020-Annual-Report.pdf

7.      BP (2021) «BP p.l.c. Group results Fourth quarter and full year 2020»,  https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-fourth-quarter-2020-results.pdf

8.      Shell (2021) «Annual Report and Accounts 2020», https://reports.shell.com/annual-report/2020/servicepages/download-centre.php

9.      Tengizchevroil LLP (2021) «Tengizchevroil published its 2019 and 2020 Corporate Responsibility Report», from 01 April 2021, http://www.tengizchevroil.com/en/about/media/tconews/item/tco-stories/2021/04/01/tengizchevroil-published-its-2019-and-2020-corporate-responsibility-report

10.  KAZENERGY (2017) «НЕФТЬ И ГАЗ НЕЗАВИСИМОГО КАЗАХСТАНА» [OIL AND GAS OF INDEPENDENT KAZAKHSTAN], p. 40, Astana 

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