NC KMG GAMMA SCORE

Date: 12 January 2010
Analysts Name:
Oleg Shvyrkov
Moscow
Tel: +7-095-783-4045
Email: Oleg_Shvyrkov@
standardandpoors.com
Anna Grishina
Moscow
Tel: +7-095-783-4041
Email: anna_grishina @
standardandpoors.com
For important information on
GAMMA Scores please see the
last page of this report.
NC KMG
GAMMA SCORE
JSC National Co. KazMunayGas
Republic of Kazakhstan
Overall Company Score* MODERATE
Maximum is 10
Component Scores:* KASE (notes) KMGZ
Shareholder influence 4+
Shareholder rights 4+ S&P credit rating: BB+/stable/KzAA-
Transparency, audit, and risk management 5+
Board effectiveness, strategic process
and incentives
5
5
Standard & Poor’s has assigned a GAMMA score of GAMMA-5 to National Company
KazMunayGas (NC KMG).
Strengths: Representatives of the parent company, Samruk-Kazyna, and independent directors
provide close management oversight. There is a solid board process and independent directors
are actively involved in the work of board-level committees. Transparency is moderate overall,
yet NC KMG provides audited annual IFRS accounts and makes important disclosures on the
web-site. The audit process demonstrates a number of strengths, and a holistic approach to risk
management has been adopted.
Weaknesses: In the eyes of Kazakhstan government, NC KMG has a social mission in addition
to its commercial goals, and the scope of its social commitments is not clearly defined. In
addition to sponsorships, NC KMG has been required on numerous occasions to invest in
projects of social importance and holds a number of none-core assets on its balance sheet. The
independent directors may not always be able to block such initiatives. There are significant
weaknesses in executive compensation policies. There are several gaps in the disclosure and
timing of financial reports is moderate.
Shareholding structure
100,0%
Samruk-Kazyna National
Welfare Fund

Executive Summary
Standard & Poor’s Governance Services assigned its governance, accountability, management, metrics, and
analysis (GAMMA) score of ‘GAMMA-5’ to JSC National Company KazMunayGas, an integrated oil and gas
company wholly owned by Samruk-Kazyna, the government asset management holding company of Kazakhstan
Headquartered in Astana, NC KMG is a holding company that owns equity stakes in a number of operating
companies, and through subsidiaries, is involved in the exploration and production of Kazakhstani oil and gas
fields, both on- and off-shore. NC KMG holds stakes in the largest domestic product-sharing consortia
TengizChevrOil (20%) and Kashagan (16.8%), and also operates domestic oil and gas pipelines, refineries and a
network of petrol stations in Kazakhstan and several countries of the European Union and Turkey (through
Romanian subsidiary Rompetrol). NC KMG also operates several supporting (‘service’) companies, including a
specialised airline, and has recently launched a number of petrochemical projects. The NC KMG group produced
18 million tons of crude oil and 3.8 billion cubic meters of gas in 2008 (consolidated) and has proven consolidated
reserves of 701 million tons of oil and 69 billion cubic meters of gas. 2008 consolidated revenues totalled
USD21.1 billion, with net income of USD3.2 billion (USD4.9 billion and USD708.3 million for the first six
months of 2009 respectively).
Strengths
Solid board process. Representatives of the shareholder and independent directors are highly competent and
knowledgeable of the industry. They provide close management oversight and decision-making is consensusbased.
There is a sophisticated committee structure and independent directors play a leading role on most
committees.
Annual IFRS statements are audited by a reputable international auditor, Ernst & Young. The audit committee has
an independent majority and is active. The internal audit and risk management procedures are gaining momentum.
NC KMG is the most valuable asset of Samruk-Kazyna, the primary asset management fund for the government of
Kazakhstan. The government has been consistent in strengthening various aspects of governance in companies
under its control. This includes the appointment of worlds-class independent directors, encouraging transparency
and risk management procedures.
The government provides NC KMG with a pre-emptive right on all domestic oil & gas assets and new subsoil
licences.
Weaknesses
The government of Kazakhstan could influence NC KMG to invest in projects of national importance that may lie
outside the company’s core area of expertise, such as petrochemicals or overseas projects. Independent directors
are in the minority on the board and may not be in position to block these initiatives.
NC KMG often serves as a government policy tool for insuring domestic supplies of affordable oil products, and
its domestic downstream operations have a strong social focus.
NC KMG does not have total autonomy in executive compensation policies and strategic process.
NC KMG is effectively a holding company whose operating assets are held by large number of legal entities. A
conventional divisional structure is only starting to emerge. NC KMG holds a significant number of non-core
assets, which could impede the effectiveness of controls and limit the influence of the board of directors.
There are several gaps in disclosure and the timing of financial reports is behind international peers.
Standard & Poor’s NC KMG. GAMMA Score Page 2