Kazakhmys PLC
KAZAKHMYS PLC ANNUAL REPORT AND ACCOUNTS 2009

Performance

Kazakhmys Petroleum

Financial summary

$ million 2009 2008
EBITDA (excluding special items) (1) (1)
Capital expenditure (expansionary) 34 42

Kazakhmys Petroleum is the Group’s oil exploration division which holds the exploration rights to a 602 km2 exploration block located to the south of Aktobe in western Kazakhstan. Work has been carried out on the site, close to a number of producing oil and gas operations, since its acquisition in May 2007.

The focus of the exploration activities in 2009 was the deep well drilling programme which commenced in 2008. The first deep well, a copy of a well drilled in the 1980s, reached the target depth of 5,185 metres and testing confirmed the presence of hydrocarbons, however recoverability was not determined due to technical difficulties. These have proved complex to overcome and to complete testing, a side-shaft is being drilled which is scheduled to reach the desired depth later in 2010.

At a glance

Operations:

Location of block: West Kazakhstan, fringe of the Caspian depression

Exploration areas: Subsalt section in Eastern Akzhar and suprasalt section in Northern Elimessai

Exploration programme: 3D seismic study Shallow well drilling programme Deep well drilling programme

The main drilling rig used on the first deep well was relocated to a new site and a second deep well was completed at a depth of 5,228 metres. The initial test results have confirmed the presence of hydrocarbons, however the well pressure was lower than anticipated. A number of options are being considered to raise the pressure including hydro and acid treatments.

The drilling of the third deep well commenced in the second half of 2009 and had reached a depth of 4,312 metres at the end of December. The projected depth of 5,200 metres is expected to be achieved by the end of March 2010 with testing to follow.

Further 3D seismic work has been carried out in 2009 on an area to the northwest of the field, previously the subject of a contractual dispute, which has now been resolved in Kazakhmys Petroleum’s favour. The results of the testing are being analysed and will be used to determine the site of a future deep well. In 2010, the third deep well will be completed and a fourth deep well drilled.

EBITDA (excluding special items)

The negative EBITDA is due to the expensing of off-site operating costs, in particular, the office expenses in Almaty and management salaries.