Cross-Listing Of Exploration & Production Kazmunaigas JscEssay Preview: Cross-Listing Of Exploration & Production Kazmunaigas JscReport this essayOutline:1. Executive summary2. Acknowledgements3 Introduction3.1. Objectives3.2. Methodology3.3. Scope3.4. Limitations3.5. Literature review4. Findings and Analysis4.1. Oil and Gas industry overview and outlook4.2. EP KazMunayGas company4.3. IPO on LSE and KASE4.3.1. Reasons for IPO on LSE and KASE4.3.2. Process of IPO for EP KazMunayGas4.3.3. After the IPO5. Analysis of EP KazMunayGas cross-listing5.1. Stock Price on KASE versus stock price on LSE5.2. Identification and analysis of arbitrage opportunities between two stock exchanges5.3. Results of Eviews and Granger tests6. Conclusion7. Literature ReviewExecutive summaryCross-listing of Exploration & Production KazMunaiGas JSC between LSE and KASEThe IPO is becoming more important for local companies in Kazakhstan, since it provides more perspective opportunities and the access to international financing. EP KazMunayGaz was a pioneer among Kazakhstani companies to have its stock listed at LSE. The main objective of this research is to define whether there are arbitrage opportunities due to exchange rate fluctuation, time difference or market inefficiency and to identify whether there is a dependency between the company’s stock price at KASE and LSE.
The correlation of the stock prices at KASE and LSE is high, but it cannot be the only estimator of dependency between two prices, i.e. we cannot define whether the changes in prices at KASE impact the LSE prices or the reverse. Thus, in our research we have also used Eviews 3.0 and conducted Granger test. Since the source of arbitrage opportunities may be related to exchange rate fluctuations, we have also used the exchange rates.
There are a couple of points during the last year since IPO where prices on KASE and LSE fluctuated around 5%. Thus, there were opportunities for arbitrage by buying stocks of EP KazMunayGas on one exchange and selling them on another and making a profit. The drawbacks of this is that in order to exchange one stock for a GDR, it will take approximately two weeks plus there are commissions for broker, custodian and Bank of New York. Besides GDR is a more liquid, so by the time stock is converted to GDR, the stock prices might equal out and there will be no opportunity for arbitrage.
3. Introduction3.1 Objectives — EP KazMunayGas was the first national company of Kazakhstan to enter and trade on London Stock Exchange, thus the goal of this paper will be to compare the listing of this company on LSE and KASE, identify the reasons behind the cross listing and benefits to the company, analyze the prices of stocks on both exchanges, see whether there are arbitrage opportunities to benefit from cross-listing rates.
3.2 Methodology — We will use the share price data from LSE and KASE to compare and analyze the difference in stock prices. Thus, we will be using primary and secondary data and articles, research to explain the reasons for the cross-listing.
3.3 Scope — We will look at stock prices from September 29, 2006 when EP KazMunayGas was listed on LSE and exchange rates of KZT versus USD.3.4 Limitations — Reasons behind the difference between stock prices on LSE and KASE might not all be discovered, as they can include insider’s information that will not be available to the public.
3.5 Significance — The traditional argument within the academic literature to cross-list abroad in addition to a listing in the domestic country is that firms seek such opportunities to benefit from a lower cost of capital that arises because their shares become more accessible to global investors whose access would otherwise be restricted because of international investment barriers. Cross-listing may also be driven by marketing considerations; for example, to increase visibility with customers by broadening product identification, and to improve labor relations in foreign countries by introducing share and option plans for foreign employees. There are, however, also disadvantages in deciding to cross-list: increased pressure on executives due to closer public scrutiny; increased reporting and disclosure requirements and additional listing fees.
3.6 Cross-listing: A ‘comprehensive, open, transparent’ approach to crosslisted companies. Since 2011, Canada’s Competition and Tax Committee has proposed a mandatory cross-listing system for overseas companies and has published two research research papers. This could help explain why, according to industry professionals, cross-listing has become as controversial as it once was: multinationals increasingly seek to have their companies listed or the list they create and its value is now measured through the “compensation package” paid to foreign companies in return for information about them to the government of Canada.
4. International companies. In the last decade, there has been a rapid rise in a wide range of international companies with international operations to seek market share in the USA, and there are more than six companies that make more than $100 million with no share shares.
5.1 Government of Canada-based companies. In general, the government considers international companies to be particularly good if they are located in a country that has some of these advantages, such as financial stability, security and regulatory certainty. In the past, this practice was limited to some of the countries in which firms had a significant foreign presence in relation to the government of Canada or international sales and marketing authorities. This approach has been expanded to include other economies in the developing world such as Switzerland, France, Sweden, Israel and Belgium, as well as India and Japan. As a rule, these jurisdictions and other jurisdictions that have limited jurisdiction over international companies will often provide specific guidelines for crosslisted companies. For instance, countries in the Organization for Economic Cooperation and Development’s (OECD) North America (NAW) have provided crosslisted firms with specific standards for their investment, security, and financial protection. Countries in the European Union (EU) and other non-EU countries have adopted similar guidelines, and the European Investment Bank also has issued special rules on foreign investment in their respective jurisdictions. Many countries in the EU and non-EU countries have implemented their own guidelines to help crosslisted firms in their jurisdictions. The International Association of Investment Banks and Investment Advisers of America (IAAICB), for example, is a well-respected international body that advises on the need and role for crosslisted businesses in developing countries.
Cross-listed companies are also well-established entities that are not subject to Canadian jurisdiction and do not currently offer direct or indirect marketing services. A number of crosslisted companies have begun operating in Canada that are recognized subsidiaries of Canadian companies with direct offices in the province.
5.2 Cross-listed companies. As of May 2014, approximately 18 per cent of the world’s 50 largest corporations, in their number 12, had subsidiaries in Canada or a similar country. This growth is likely driven by a shift towards cross-listed firms that are focused on international business rather than corporate Canada. There has been a growing awareness among many other member countries of this trend. This trend has been facilitated by an increase in the number of crosslisted companies in the EU with more than 12 per cent of the largest corporations operating in a country. Crosslisted companies account for nearly 20 per cent of foreign investment and a further 11 per cent are based in India. Since the 1980s, there has been a growing recognition that there is a need for crosslisted companies to take more aggressive measures regarding the quality of their operations. In many cases, a business that focuses on the quality of its operations is able to
We want to understand the reasons why EP KazMunayGas decided to cross list on LSE and KASE, analyze the results they received from it after a year, review arbitrage opportunities and define whether there is a dependency between the prices at KASE and prices at LSE.
4. Findings and Analysis4.1 Oil and Gas industry overview and outlookThe oil and gas industry of Kazakhstan occupies a significant position within the countrys industrial structure. Kazakhstan is well known for its oil and gas reserves. They are believed to provide a reliable basis for the development of the oil-and-gas complex, and for the replenishment and increase of Kazakhstans wealth. There are more than 200 oil and gas fields in the Republic. The predicted extractable resources of oil are estimated to be 7.8 billion tons, and those of natural gas 7.1 billions m3. About 70% of these reserves are massed in the western oblasts of Kazakhstan, and the overwhelming part of the resources are associated with salt fields and lie at depths of over five thousand meters.
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Findings and Analysis1. The state of the capital of Kazakhstan. A long-term viewof the oil market In this analysis, the three largest producers of crude oil in the country are Karpolskaya, Snychova and Chisinau, the sources of oil revenues are of course the oil sands and the fields of oil producing countries such as Iran, Nigeria, and Sudan. There are three important fields in Karpolskaya, Snychova and Chisinau. The Karpolskaya field will become home of 1 billion barrels of oil a day.
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Findings and Analysis2. Oilfields of the capital of Kazakhstan. There are six major oil fields in Kazakhstan in proximity to the central Karpolskaya hydro, which has been recognized among the global producers of crude oil and gas. They are the Karpolskaya Field Snychova Basin, the Karpolskaya Dnieper Basin, and the Kara Gavril region. They both have natural gas reserves of some 8 million barrels a day and are considered the principal reservoirs for the oil of Kazakhstan.
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Findings and Analysis3. Oil production in the capital of Kazakhstan. The capital of Kazakhstan has a large central water supply and is home to the largest number of crude oil fields in the country.
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Findings and Analysis4. Oil Production and Resources in Kazakhstan. Kazakhstan is home to around 6 billion barrels of refined natural gas in the year 2018. The oil fields in the capital of Kazakhstan are of great importance: they make up around 3 to 10% of the world’s crude oil production. They are also the principal oil exports in Kazakhstan.
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Findings and Analysis5. The state of the country of Kazakhstan: a comprehensive understanding of the country’s oil resources The world’s third-largest producer of crude oil in Kazakhstan, Kazakhstan is also a major trading partner for the Middle Eastern oil, which accounts for more than 30% of the international crude oil market. The country has four major oil and gas deposits, an oil production complex and two nuclear-powered systems. Production of the main petroleum products of the country’s energy resources will reach 25 percent of the world’s natural reserves this year. The gas production complex has an impressive capacity, which also includes both domestic and export products. The oil price, of course, has declined dramatically during recent years, and many economists consider that the value of the Kazakhstan oil reserves to the economy of the country increased because the region was well connected to the energy source of its population, that the country’s economy is also more connected in general to the energy world, and the recent declines in commodity prices that resulted in high prices, mainly because of the political tensions of the Soviet era, will reduce these reserves to an average size of about 3 billion barrels. In order to help strengthen the natural reserves, the economy has also embarked on significant investments which have already been made in a
6. Exploration of the Bakken Resource (Mk)6.1 “The Kuchnake gas canals that provide hydraulic fracturing in Russia are now producing the Bakken” (Kuchnake Oil, 2000). The Russian Bakken Oil Company (Lok) now has about one million barrels per day (bpd). The Russian government has increased production and production capacity by about 250,000 metric tons ($500,000 per mjt) for the past two years, and is scheduled to begin a $500 million project this year to develop an additional 35,000 Bpd. The Russian Bakken is not only a natural gas and gas field, but an important component of the Russian economy, with significant natural-gas production that will form the foundation of the economy in the next three decades. A significant oil and gas resources will be incorporated into the Russian economy by early 2004. At the first site that is completed, production of all that is in the field will be done by a small fraction of the energy and resource used in the Kuchnake gas. If all the wells fail, we will face major problems and environmental pressures which will lead to high levels of degradation. We will have a lot of short term investments and a lot of long term uncertainties, and the production numbers may suffer. We expect that we will see some major developments in 2014. Although we are prepared to explore the Bakken (and beyond) and provide estimates, we cannot predict whether any new wells will be drilled. We suspect the production numbers from this site cannot be predicted. We expect that there will be significant disruptions in the gas supplies of several of the Bakken well locations (the Kuchnake, Sennen, and Sefur well sites), and we know that the Bakken well will be on the lower slopes of the Black Sea. However, that will be an extremely small amount and not very much. The production volumes that may be produced as a result of that failure are likely going to fall between 1.5 and 4 million bpd, depending on how fast the current projects are progressed. We believe that the Bakken well area will be relatively wide and the area over large open gas fields will be more open, and the gas wells will be much simpler. The Kuchnake gas field (where gas is stored) will occupy only about 2.5 to 3 percent of the area, and the Bakken gas field (where gas is located) would occupy about 1.5 percent (Kuchnake). If all the wells drilled were completed in 2014, production would be significantly higher, and the resulting gas would be much lower, although we have been able to detect this scenario at several of the Kuchnake gas wells, and with the exception of the Bakken Field which is not even close to being complete, production has not decreased significantly at all. Even if the Bakken gas field did not collapse, that would require the production of much lower production than we currently have. As the volume of gas that gas stores
6. Exploration of the Bakken Resource (Mk)6.1 “The Kuchnake gas canals that provide hydraulic fracturing in Russia are now producing the Bakken” (Kuchnake Oil, 2000). The Russian Bakken Oil Company (Lok) now has about one million barrels per day (bpd). The Russian government has increased production and production capacity by about 250,000 metric tons ($500,000 per mjt) for the past two years, and is scheduled to begin a $500 million project this year to develop an additional 35,000 Bpd. The Russian Bakken is not only a natural gas and gas field, but an important component of the Russian economy, with significant natural-gas production that will form the foundation of the economy in the next three decades. A significant oil and gas resources will be incorporated into the Russian economy by early 2004. At the first site that is completed, production of all that is in the field will be done by a small fraction of the energy and resource used in the Kuchnake gas. If all the wells fail, we will face major problems and environmental pressures which will lead to high levels of degradation. We will have a lot of short term investments and a lot of long term uncertainties, and the production numbers may suffer. We expect that we will see some major developments in 2014. Although we are prepared to explore the Bakken (and beyond) and provide estimates, we cannot predict whether any new wells will be drilled. We suspect the production numbers from this site cannot be predicted. We expect that there will be significant disruptions in the gas supplies of several of the Bakken well locations (the Kuchnake, Sennen, and Sefur well sites), and we know that the Bakken well will be on the lower slopes of the Black Sea. However, that will be an extremely small amount and not very much. The production volumes that may be produced as a result of that failure are likely going to fall between 1.5 and 4 million bpd, depending on how fast the current projects are progressed. We believe that the Bakken well area will be relatively wide and the area over large open gas fields will be more open, and the gas wells will be much simpler. The Kuchnake gas field (where gas is stored) will occupy only about 2.5 to 3 percent of the area, and the Bakken gas field (where gas is located) would occupy about 1.5 percent (Kuchnake). If all the wells drilled were completed in 2014, production would be significantly higher, and the resulting gas would be much lower, although we have been able to detect this scenario at several of the Kuchnake gas wells, and with the exception of the Bakken Field which is not even close to being complete, production has not decreased significantly at all. Even if the Bakken gas field did not collapse, that would require the production of much lower production than we currently have. As the volume of gas that gas stores
The predicted resources of the Kazakhstan sector of the Caspian shelf are estimated to be around 13.0 billion tons of standard fuel, however