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Executive Summary

In the term paper, our group focused on analysis of financial performance of

KazMunaiGas Exploration Production Company. KazMunaiGas Exploration Production is a

leading national oil and gas company, which deals with mining, production, processing, and

exporting of the natural resources. KMG EP mission is effective exploitation of hydrocarbons

in order to maximize the benefits to shareholders, whilst providing long-term economic and

social benefits for the regions of our operations.

In order to assess company financial performance and development, methodology

used during the study consisted of trend analysis and comparative examination of the firm

relative to the market in terms of its financial ratios. The study involves assessment ofKazMunaiGas EP performance over the last three years, that is from 2010 to 2012. Major

financial indicators analyzed by the group involve Returns on equity and assets, analysis of

working capital policies, debt ratios, dividend policy evaluation, and estimation of required

rate of return and risk of companys stock.All data needed for analysis was taken from

financial statements of KazMunaiGas EP, Stock Exchange, official web site of the firm,

finance yahoo.com and reports of local financial analysts.

As a result of financial indicators evaluation and comparison of companys ratios, our

group found out that the firm has its own strengths and weaknesses in financial performance.

So, although KazMunaiGas uses relatively conservative working capital policy and prefers

equity to debt financing, which significantly reduces companys risk, still high level of idle

current assets results in reduction of firms returns. Moreover, companys substantial

expenditures also have negative impact on its Net Income, and as a consequence, reduce

return on companys assets. However, increasing dividend payout ratio and good return on

companys stock relative to its risk send positive signal to the shareholders as well aspotential investors.

By virtue of such findings made due to the analysis of financial ratios and policies of

company, our group developed its recommendations concerning its improvement

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Table of Contents

I. Introduction 1

A. Objective 1

B. Scope 2

C. Methodology 2

D. Limitations 2

E. Significance of the issue 3

II. Findings and Analysis 4

A. Corporate Governance of KMG EP 4B. Financial statement analysis of KMG EP 7

a. Evaluation of working capital policy and liquidity management 7b. DuPont analysis 8

C. Capital Structure Policy 10D. Dividend Policy 11E. Capital Asset Pricing Model 14

III. Summary and Recommendations 15

IV. Appendix 18