Joint Stock Company "National Company "KazMunayGas" ($KMGZ)

[Foreign Language] Ladies and gentlemen, welcome to the KazMunayGas 2025 Operational and Financial Results Conference Call. The call is being recorded. Please note the company's presentation on your Zoom screen. Our call today will be held in Russian with simultaneous translation into English, Kazakh and [indiscernible]. So you can ask verbal and written questions in any language and sequence. [Operator Instructions].

[Foreign Language] [Audio Gap] discussion of the key results and performance for 2025. And now over to Mr. [indiscernible] Chairman of the Board of KMG. The new data on the S&D. 2025 marked an important stage in the implementation of KazMunayGas corporate development strategy. Despite ongoing volatility in global energy markets and a decline in oil prices compared to the previous year, the company demonstrated resilient operational and financial results. In 2025, KazMunayGas continued to develop its business across the entire value chain from upstream through midstream to downstream. It should be noted that this model enhances the company's resilience to market fluctuations and ensure stability in operational reforms. For the year, oil and gas condensate production attributable to KMG increased by 10% to 26.2 million tonnes while gas production grew nearly by 20% to 11.45 billion cubic meters. The development of our international mega projects made a significant contribution to this growth. In particular, as the Tengiz fill, well production commenced the Head of Schedule as a new generation plant within the future growth project, a key industry milestone of the year. Alongside this, [indiscernible], can you switch the slide. Yes, that looks okay. Alongside this, oil and gas condensate production increased at gross operating assets in 2025. KMG identified 2 strategic focus areas. First commissioning new fields and second, gas monetization as well as oil extraction. So higher hydrocarbons production and gas monetization, as I've already said. Specifically -- well, in the country, the [indiscernible] underway. And now gas price is much higher as that gives us a possibility to earn on processing of by-product gas. Specifically at [indiscernible] following the commissioning of the new [indiscernible] and the technical start as the first start-up complex centers up of [indiscernible], oil production rolls to 2.85 million tonnes and gas production to 242 million cubic meters, an increase of 2.2% and 18%, respectively, compared to 2024. Ozenmunaigas Gas plans to launch the second startup for links, enabling gas production at [indiscernible] reach 860 million cubic meters annually and thereby expand commercial gas supplies. For this [indiscernible], the gas sales contract based on the pricing formula approved in the Republic of Kazakhstan was signed for the first time. And the growth of production of the Tangshan the [ Mongstad ] region grew by 7.5% to 677,000 tonnes. Under the Euro Oil and Gas project in the West Kazakhstan region gas production reached 470 million cubic meters and oil and gas condensate production reached 343,000 tonnes. The transition to project design equipment was completed laying the foundation for further growth. An important step was ensuring raw gas processing under the [indiscernible] project at the October region enabling industrial development with production expected to reach up to 1 billion cubic meters of gas annually by end 2027. We Additionally, approximately 433,000 tonnes of oil were obtained from modern enhanced oil recovery methods, including polymer flooding, simultaneous separate injection, injection profile leveling and pilot industrial test on drilling small diameter wells. Specialist attention was devoted through exploration. During the year, the company significantly expanded its portfolio of exploration projects, including the [indiscernible] block in the West Kazakhstan region, [indiscernible] region and partially in the [indiscernible]. We went on with geological study of subsoil also under the state program for Ship study on the brakes in the [indiscernible]. This expansion block in the our region. This expansion forms the basis for long-term resource base replenishment and future production growth. In the midstream segment, the company continues to strengthen expert infrastructure resilience and develop additional supply routes. Total pipeline and marine oil transportation reached 83.3 million tonnes. Development of alternative groups continued, including supplies via the [indiscernible] and increased our deliveries to Germany. In the upstream segment, the company achieved historically high performance. Total hydrocarbon feedstock processing at Kazakhstani and Romanian refineries amounted to 21 million tonnes. Refining at Kazakhstani plants reached a record 90%. Production of oil light oil products increased with yield across all national refineries reaching 77.7%, with the highest result to date. These achievements ensured stable domestic fuel supplies and in cancer refining asset efficiency. The company is also advancing projects to expand refining capacity, including preparations to increase the [indiscernible] oil refineries capacity. Petrochemicals remain a key strategic direction. In the [indiscernible] region, an integrated gas chemical cluster is taking shape comprising to 1.25 million tonnes per year polyethylene plant, a gas separation complex and main infrastructure for ethane and propane transplant. The petrochemical segment is already delivering results. The KPI integrated gas chemical complex increased polypropylene output with KMG's share reaching approximately 187,000 tonnes in 2025, over 50% higher than the prior year. These projects will significantly expand the value chain and create new explorative opportunities for Kazakhstan. The company is consistently advancing its low carbon development program. In 2025, a 50-megawatt solar power plant was commissioned in [indiscernible] is the first phase of a hybrid energy complex implemented with international partners in the [indiscernible] region. Financial results in 2025 iron the core business resilience. Despite lower global oil prices, KMG's revenue grew by 12.5% to KZT 9.4 trillion and EBITDA increased by nearly 20% to KZT 2.4 trillion. Operational and financial performance was also reflected in market valuation. KazMunayGas shares rose by almost 50% during 2025, reflecting strong investor confidence in the company's strategy and growth projects as well as their trust. In conclusion, 2025 results form the resilience of KazMunayGas business model confirmed the effectiveness of its development strategy. The company continues to strengthen its resource base, develop infrastructure and implement new projects, providing the foundation for sustainable long-term roles and shareholder value creation. In conclusion, I extend my sincere gratitude to the employees of the KMG Group, our partners and shareholders for their contributions to these achievements. Thank you very much.

Thank you for the overview of the company's operations in 2025, now over to Diana Aryssova on operational and financial performance of KMG.

Thank you, Marat. Dear [indiscernible] let me present the results of KazMunayGas performance for 2025. As you may know, KazMunayGas is Kazakhstan leading vertically integrated oil and gas company. KMG owns and manages the assets across the entire production chain, exploration and production, oil field services transportation, refining as well as new strategic direction, and the company has successfully entered Petrochemicals. All our production assets are marked on the map. In 2025, the company intensified its exploration activities launching full-scale operations in the [indiscernible], October, West Kazakhstan [indiscernible]. As of December 31, 2025, KMG's proved and probable hydrocarbon reserves, 2P reported in accordance with PRMS standards totaled [indiscernible] million barrels of oil equivalent with a reserve replacement ratio of 100% forming a solid foundation for sustainable long-term production growth. At the same time, the proved reserves life 1P or P90 stands at 13 years. KMG 19 diversified asset portfolio, including states in Kazakhstan's largest oil and gas projects [indiscernible], which ensures a resilient resource base and stable production levels. KMG's came this year in the country's oil and gas condensate production amounts to approximately 26%. KMG holds a leading market position in the well transportation sector with a domestic market share of around 55%. And at controls a key oil transportation infrastructure, including the CPC pipeline system, the [indiscernible] route, the [indiscernible] pipeline as well as marine shipments via the [indiscernible]. KMG participates in the management of full Kazakhstan's largest oil refineries at around [indiscernible] can refineries plus the bitumen plant, which collectively account for approximately 80% of the country's refining capacities. KMG is also advancing petrochemicals, as I mentioned, as a strategically important direction for business diversification, focused on producing competitive high value-added products for both domestic and international markets. The KPI integrated gas chemical complex demonstrated growth in polypropylene production and expense. Alongside this, we have successfully commenced construction of a polyethylene plant through our [indiscernible] joint venture, thereby laying the groundwork for further development of the petrochemical cluster. In 2025, the global oil and gas industry faced numerous macroeconomic and geopolitical challenges. However, despite market volatility, KazMunayGas maintained its resilience and successfully adapted to the evolving conditions. The average annual price of key BCO crude oil declined to USD 69.9 barrel per barrel, in 2025 as compared to USD 80.7 per barrel in 2024. Despite this decrease, KMG's financial performance remained stable and even demonstrate moderate growth. The average annual exchange rate of Tenge against the U.S. dollar weakened by 11% in 2025, amounting to KZT 521.3 per U.S. dollar. In June of last year, KMG credit rating was upgraded. S&P Global Ratings raised to the company's rating from Ws to BBB with a stable outlook. This decision reflects the company's ongoing efforts to enhance operational efficiency, reduced debt burden and strength in cash flow resilience. Currently, KMG holds investment-grade credit ratings from all 3 major rating agencies in line with the sovereign credit rating of the Republic of Kazakhstan. 2025 was a year of significant achievements for KazMunayGas. Over the past year, the company improved its operational and financial performance and advanced sustainability initiatives. In operations, crude oil production commenced at the new generation plant at the Tengiz field and the large-scale modernization of the [indiscernible] plant was completed. Furthermore, the company progressed in implementing several major petrochemical projects, including the stop of [indiscernible] works on the gas separation complete projects and the final investment decision full construction of 2 main pipelines to secure feedstock supply for petrochemical projects. We continue to actively develop exploration activities aimed at expanding the resource base. In 2025, 4 contracts for hydrocarbon exploration and production were signed. A key result this year was the discovery of a flowing gas influx at the deep exploration well [indiscernible] confirming the presence of hydrocarbons. Next steps include continuing appraisal work as well and drilling a second exploration role. In finance, KMG demonstrated resilience and growth in key metrics. In 2025, the company expanded its presence in international capital markets, successfully debuting on the Hong Kong Stock Exchange by placing [indiscernible] RMB 1.25 billion with a parallel listing on the [indiscernible] International Exchange. The company remains committed to a conservative approach to debt management and ensuring financial stability. In particular, in December 2025, KMG executed a partial early buyback of Eurobonds, totaling USD 500 million. Additionally, the company paid dividends to shareholders amounting to USD 575 million based on 2024 results. We continue to consistently pursue our sustainability agenda. In 2025, the company's sustainability management system received an MSCI rating at BBB. Progress was noted across several environmental and social areas in biodiversity, conservation and health and safety practices intensive renewable energy development, a 50-megawatt solar power plant was commissioned and [indiscernible] with the first phase of a hybrid power plant with a total capacity of 247 megawatts implemented in partnership with any -- as for key operational and financial results of KazMunayGas, in 2025, we demonstrated the resilience and efficiency of our business model despite market volatility. Our key operational indicators improved compared to 2024. Oil and gas condensate production, including KMG's share in joint ventures and associated companies, increased by 10% year-on-year. Total hydrocarbon feedstock processing in 2025 reached a historic high of 21 million tonnes, representing a 9.5% increase compared to the previous year. Total pipeline and marine oil transportation remained at a level comparable to the prior year amounting to 83 million tonnes. Despite a notable decline in oil prices, we achieved growth in both revenue and EBITDA. P&G generated significant free cash flow totaling USD 2.4 billion. Our implemented financial strategy enabled us to substantially reduce their debt by 67%. We will provide a more detailed overview of key financial and operational results on the following slides. The market price of KMG shares at year-end 2025 stood at KZT 21,720 per share, reflecting a 48% increase over the year and the 158% rise since the IPO. The company's market capitalization at year-end grew to USD 28 billion, underscoring investor confidence and strong recognition of our strategic initiatives. As of today, KMG shares are trading at about 3, 10 gig reflecting heightened demand amid vital East instability with current market capitalization of USD 41 billion. We consistently adhere to our dividend policy aimed at delivering stable returns to our shareholders. In 2025, KMG paid record dividends for the third consecutive year. In June 2025, the company distributed dividends totaling USD 575 million. As I mentioned, our 2025 demonstrated positive momentum in [indiscernible] key operational indicators. Oil and gas condensate production increased by 10%, reaching 26.2 million tonnes or 544,000 barrels per day. The significant growth was driven by the successful commissioning and capacity ramp-up of the new search generation plant as to the future growth project at the Tengiz field as well as increased production at our operating assets, including the industrial development of the [indiscernible] field operated by our joint venture, Euro oil and gas LLP and the opening of new wells at the [indiscernible] fields. Well transportation volume amounted to 83.3 million tonnes remaining at the prior year's level pipeline shipments increased by 3.3%, supported by higher transportation of Tengiz crude via the CPC system and increased supplies to the domestic market. At the same time, marine transportation volume decreased by 18.7% to 10.7 million tonnes due to adjustments in CPC cargo allocation plans for [indiscernible]. In the refining segment, Kazakhstani refineries achieved record performance in 2025. Processing volume reached 14.7 million tonnes, refining debt obtained 90.1% and the yield of light oil products reached 77.7%. Refining at Kazakhstani plants increased by 3.2%, thanks to the stable operations of [indiscernible] refinery and higher crude supplies to [indiscernible] Refinery. Processing volumes at KMG International, refineries also grew by 27.9% driven by capacity restoration following major repairs and the restart of the mild hydrocracking unit in 2024. As for our mega projects. Here, you can see key operational and financial indicators there over. Tengiz oil production increased by 40.3% and gas production grew by 49.9%. Dividends received from Tenke in 2025 rose by 58% year-on-year, amounting to USD 1.3 billion. [indiscernible] oil production grew by 4.9% and gas production increased by 6.4%. This positive performance was driven by stable operations at production facilities as the absence of major scheduled turnarounds compared to 2024. Total cash inflows from the asset dividends and share capital reductions amounted to USD 1.4 billion, at Karachaganak oil and gas condensate production totaled 1 billion -- almost 1.1 million tonnes while gross gas production before reinjection increased by 5.5% following the commissioning of the fifth compressor. Total cash inflows from the assets amounted to USD 125 million. Regarding key financial metrics. EBITDA in 2025 amounted to USD 4.5 billion, representing a 7.7% increase. This growth was primarily driven by a higher share of profit from joint ventures and associated companies in the oil and gas exploration and oil transportation, well, upstream, midstream and downstream segments as well as increased revenue at the level of KMG's corporate center. Looking at adjusted EBITDA, which accounts for dividends received from joint ventures and associate companies instead of their share of profit [indiscernible] USD 4.9 billion, also reflecting a 7.7% increase, underscoring the stability of the company's operational profitability. Dividends received from joint ventures and associated companies grew by 26.5%, reaching USD 1.8 billion. The main drivers behind this increase for higher dividends from Tengizchevroil LLP and the Kazmortransflot LLP consortium project. In 2025, KMG generated significant free cash flow totaling USD 2.3 billion. The 7.4% decrease was due to lower oil prices. However, in Tengiz terms, free cash flow grew by 2.8% due to exchange rate effects. Capital expenditures on an accrual basis decreased by 14.2% year-on-year, amounting to USD 1.3 billion. The primary reason for this reduction was the completion of the desalination plant construction project, implemented by [indiscernible], a subsidiary of Ozenmunaigas JSC. Net profit for went to over to consolidated cash and cash equivalents, consolidated cash and cash equivalents, including the cash in the form of deposits as of December 31, 2025, increased by 16.6% to USD 6.2 billion as compared to the same metric a year ago. During the year, the company generated significant positive operating cash flow, which you can see on the page, which amounted to USD 1.6 billion before dividends received from joint ventures and associated companies. Net debt repayments totaled USD 649 million. In December 2025, the company executed a partial early buyback of bonds amounting to USD 500 million, as I mentioned already. The bulk of KMG's total debt is denominated in U.S. dollars, 69% as of the 31st of December 2025. Throughout 2025, the company consistently reduced its debt burden. Total debt in dollar terms decreased by 7.8%, amounting to USD 6.9 billion. Driven by the growth in cash and cash equivalents, including cash in the form of deposits, net debt demonstrated a significant decline of 66.5%. As a result, KMG reached a historically low level of leverage. Under current conditions, this is a crucially important metric as the company is entering an active investment phase associated with the implementation of petrochemical projects as a low debt level provides the flexibility needed to finance these initiatives. At the same time, the company maintains a balanced structure of future debt maturities and effectively manages its debt burden. The next major repayment in the coming years is scheduled for [indiscernible], you can see on the page, and it will amount to USD 1.4 billion. In conclusion, I would like to emphasize that KazMunayGas continues to demonstrate reliability and resilience. We remain focused on key strategic priorities aimed at consistently enhancing our company's value. We continuously adapt our business model to evolving conditions by implementing advanced technological solutions while maintaining performance, stability, high liquidity and disciplined capital allocation. This approach enables KazMunayGas to build a foundation for the company's long-term sustainability and its ability to ensure the nation's energy security. Thank you.

[Operator Instructions]. There are some questions in writing. Let us start with them. [indiscernible]. Please comment on the company's further steps on debt expecting the maturity peak in 2030?

Thank you very much for your question. The company plans to maintain the current debt level, and we will keep committed to our debt and liquidity policy. The company liquidity is quite comfortable currently. And besides, as I said in my presentation, we are looking for alternatives in debt capital. Last year, we placed in some bonds at Hong Kong Stock Exchange, for example. So until 2030, we are planning to keep a certain balance between our debt financing on and on financing of our projects to the company repay its debt and exit its active investment phase successfully.

Could you comment on the status of serial acid and fully cemented trial projects. It was reported a Russian company will take part. Have you made a final decision. Please elaborate.

Good day, [indiscernible]. Thank you very much for your question. KazMunayGas, in its project pipeline has this project to produce [indiscernible] , we made a prefeasibility study and drafted the corresponding report but we have not proceeded to detailed feasibility study because we haven't decided on a technological partner. We have had a negotiation with a number of companies, including Chinese companies and companies from the European region. At present, we have not made a final decision on the potential partner yet. And so this work is still underway.

Thank you. Next question [indiscernible]. Could you comment on the sources of financing for capital-intensive projects, including petrochemicals?

Before I answer the key question, I would like to comment was that the part of oil and gas and petrochemical projects and other capital-intensive projects are implemented jointly with our partners based on joint ventures -- and the funding structure is defined on a project basis, project by project, some of them have project financing. Some of them have disciplined guarantees. But on the whole, we are in line with the classical arrangement for our own and debt funding. So some of the investment is made by us and some others with our partners if there is a joint venture. Some of the costs will be financed by raising debt funding due to which until 2030, we expect our debt to grow. That we will keep an eye to make sure that there is a proper balance between our own and borrowed funds.

Over to the next question from [indiscernible]. Please comment once the current status of how many of them are in operation now? Do you have any back up? What are the timing -- what are the time frames for back up to this?

Thank you for your question. Currently, [indiscernible] terminal. There are some units in operation at CPC [indiscernible] without backup and additionally, various equipment in transportation. Another unit will be delivered on one of these days and it will be assembled soon. So we will support the work of 2 units on a full scale with one back up one. Thank you.

[Operator Instructions]. The next question comes from [indiscernible]. Is KMG thinking of first lowering its debt burden? Are you planning to enter international capital debt markets?

Let us speak about finance theory, first of all, as approved, the company should have a comfortable debt level according to classical regulations. As a rule, the company's own funding is more expensive than debt funding. As I mentioned, our debt over the coming 5 years will be going up due to implementing a number of large CapEx projects, including those in petrochemicals. We will keep a close eye on the balance between our own funds and borrowed funds.

And as for diversification of the market, last year, we tapped into a new market for KazMunayGas, which is Hong Kong, as I mentioned, demand and -- and these funds for KazMunayGas is cheaper as compared to Eurobond issues, for example. So this is how we intend to progress optimizing our debt burden and maintaining an optimal balance between owned and borrowed funds.

Over to the next question from [indiscernible]. In 2025, how much progress have you made in joint projects with Russian [indiscernible] are you planning to replace or substitute to well with another investor? Or are you planning to work together?

Thank you for your question. Last year, we completed the stage of designing in a joint project [indiscernible] given the sanctions currently, further implementation of the project has been put on hold.

[Operator Instructions] The next question comes from the line from [indiscernible]. What kind of investments are you planning for 2026? And what are the priority projects.

CapEx for 2026 is about Tengiz 750 billion. Our priority projects are zones in petrochemicals and exploration.

Ladies and gentlemen, thank you very much for joining our call today. This concludes our conference. And if you have any additional questions, please reach out to our IR department using the contact on the web page or on our presentation page. See you again soon. Goodbye. Thank you for taking part.

Ladies and gentlemen, this concludes our call for today. You may now disconnect.