Page 20 - FSUOGM Week 09 2023

FSUOGM NEWS IN BRIEF FSUOGM

Fitch affirms Mongolian Mining from around 24% in 2022, with greater Russia, and its oil exports are primarily
Kazakhstan shares a long border with
FCF as a result of higher volumes, stronger
at 'B' with negative outlook pricing assumptions, and normalising costs. transported through the Caspian Pipeline
Consortium (CPC) line, which runs
“We forecast leverage to drop below 1.0x in
Mongolian Mining Corporation's (MMC) 2023, supported by strong ASP and margin through Russia and terminates at a Russian
Long-Term Foreign-Currency Issuer expansion due to decreasing costs, from a Black Sea export terminal. If the CPC
Default Rating (IDR) has been confirmed high level of 3.5x at end-2022 resulting from pipeline or terminal was closed, more than
at 'B' with a Negative Outlook by Fitch controlled border throughput and weak 1% of global oil supply would be shut in,
Ratings. ASP resulting from long delivery times.” costing producers billions of dollars in
MMC's senior unsecured notes due stated the rating agency. lost income. According to the securities
2024 were also affirmed by Fitch at 'B' with MMC reduced the principal of its 2024 filing, ExxonMobil's stake in Kazakhstan's
a recovery rating of 'RR4'. The notes were senior notes to $376mn from $440mn, oil fields produced 246,000 barrels of oil
co-issued by MMC and its wholly-owned through the open market and a tender offer and gas per day last year, providing after-
subsidiary, Energy Resources LLC, and in 2022 when the bond price was trading tax earnings of around $2.5bn. The filing
are guaranteed by the majority of MMC's at a deep discount. It expects to generate further stated that if oil exports through
operating subsidiaries. enough operating cash flow by 1Q24 to the CPC pipeline were disrupted, curtailed,
The rating agency's Negative Outlook repay the outstanding principal. or temporarily suspended, ExxonMobil
reflects uncertainties related to sustained However, Fitch said it believed the lack "could experience a loss of cash flows of
price realisation following China's rapid of sustained improvements in realised ASP uncertain duration from its operations in
recovery as a result of its reopening after the and other regulatory risks associated with Kazakhstan."
dropping of zero-covid protocols, as well as royalty charges can affect margins, thereby ExxonMobil owns a 25% interest in the
regulatory risks related to effective royalty creating a potential shortfall for the 2024 Chevron-led Tengizchevroil (TCO) oil
rates, which could result in a potential repayment, which MMC does not have production joint venture, which controls the
shortfall in note repayment in 2024. sufficient committed facilities to cover. Tengiz and Korolev oil fields in Kazakhstan,
MMC's rating is limited by its small The Outlook could be revised to and a 16.8% working interest in the
scale, single-product focus on hard coking Stable if MMC demonstrates an ability to Kashagan field.
coal, and limited cost competitiveness accumulate sufficient cash flow to repay the Chevron produces more than 12% of
outside of its main market in northern 2024 senior notes without requiring a large its total output from Kazakhstan - around
China. amount of funding. 380,000 bpd - and plans to increase total
Fitch observed that MMC's core A factor that could lead to a negative output by 40% at Kazakhstan's largest
coking-coal operation has normalised rating action/downgrade, individually field Tengiz to approximately 1mn bpd.
amid stabilisation in the border situation. or collectively, would be poor cash In December 2021, Chevron finance
Prolonged covid-related disruptions at accumulation that would indicate a large chief Pierre Breber stated that its Kazakh
the border with China have eased. MMC's shortfall for the repayment of the 2024 production in 2022 suffered temporary
average daily throughput to China was notes. outages averaging less than 10,000 barrels
raised to over 800 trucks in December per day.
2022, in line with the pre-covid 2019 level,
from around 120 trucks in 1Q22. Daily ExxonMobil issues warning on
throughput was sustained at over 900 trucks Kazakhstan says it held talks on
in the first half of February 2023. potential risks to oil operations
MMC has ramped up processing volume gas pipeline to connect Russia
to 2.7mn tonnes in 3Q22 and 3.1mn tonnes in Kazakhstan
in 4Q22 from 0.9mn tonnes in 1H22. In and China
addition, Fitch expected the company's ExxonMobil last week issued a securities
realised average selling prices (ASP) for filing warning of potential risks to its oil Kazakhstan announced at the end of last
hard coking coal to have increased to over operations in Kazakhstan, which generated week that it has held talks on constructing a
$160/tonne in 2023 from the 2022 average $2.5bn in earnings last year, Reuters gas pipeline that would connect Russia and
of over $140/tonne. As a result, Fitch reported. China via Kazakh territory, according to an
revised its previous free cash flow (FCF) The spotlight on threats to Kazakhstan's AFP report.
forecast of over $100mn to $200mn to oil exports has intensified since Moscow's Such talks have taken place amid
reflect higher volumes and stronger pricing invasion of Ukraine a year ago. Both Moscow shifting its energy export focus
assumptions. ExxonMobil and Chevron are major holders towards Asia as a result of ongoing tensions
Fitch expects the company's EBITDA in Kazakhstan's oil production and export by sanctions-imposing Western countries
margin to improve to over 40% in 2023, pipeline. following the invasion of Ukraine.

P20 www. NEWSBASE .com Week 09 02•March•2023