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Chagala: Be a part of the Kazakh oil boom

“The industry is constantly changing and is very difficult to predict."

Oil rig on the Caspian sea at sunset
Rich in natural resources, the country boasts some of the world’s largest oil fields.

Chagala Group Limited (LON:CGLO) provides residential accommodation, on-site offices, catering, leisure, transport, warehousing and logistics support to all major companies involved in Kazakhstan’s emerging oil and gas industry.

Rich in natural resources, the country boasts some of the world’s largest oil fields, including the massive Kashagan discovery.

The field, in the Kazakh sector of the Caspian Sea, ranks as the largest commercial discovery in the last 40 years.

Like Kashagan, most of Kazakhstan’s major oil reserves and projects are found in the western part of the country, which is also the focus of Chagala’s development.

In seven years, oil production in the country has more than doubled to 1.71mln barrels per day in 2010.

By 2020, output from the country’s three major fields alone – Karachaganak and Tengiz fields and the off-shore Kashagan – is expected to grow to 3-3.5mln barrels per day.

Kazakhstan president Nursultan Nazarbayev has announced ambitious plans to double the country’s annual oil production to more than 1.2bn barrels, joining the world’s top five oil producers.

A land of opportunity

“Kazakhstan is full of untapped potential,” chief executive Francisco Parrilla told Proactive earlier this year.

“As it becomes a business environment, it’s a land of opportunities.” But Parrilla has his sights set further afield.

“We’re in the process of expanding into countries where people don’t see an obvious opportunity,” he told Proactive.

“Like for example Egypt, Bulgaria or Turkey – where everybody thinks is not the right place to invest, we think it’s a good time to invest.”

Stable performance despite volatility

If its progress in its home region is anything to go by, Chagala’s model could well take off in neighbouring regions.

One would think a company so reliant on the oil industry would be feeling the tantalising highs and near-crippling lows of such a volatile market.

But, as finance chief Svetlana Mendesh explains, that’s not necessarily the case.

“The industry is constantly changing and is very difficult to predict,” she admits.

“But in spite of world economic crisis and volatile oil prices, the group still demonstrates a stable performance and manages to invest in the development of new projects.”

A mix of active sales strategies and extensions of several major contracts allowed Chagala to weather the storm in the wider industry in the first six months of the year, as demonstrated by its solid results for the period.

Operating profits up 18%

In the first half of this year the group saw operating profits of US$2.15mln, up 18% on US$1.75mln seen a year earlier, on revenues of just over US$10mln. Pretax profits more than doubled to US$1.49mln.

Chagala was awarded a new lease agreement for office space with the North Caspian Operations Company in Atyrau, a region of western Kazakhstan, and also completed the reconstruction and refurbishment of an office building in the city of Uralsk.

The development has been earmarked by the headquarters of the Karachaganak Petroleum Operating consortium, one of the largest companies involved in the development of gas condensate fields in Kazakhstan.

“Many of the pieces are in place”

“The market we operate in is constantly changing and is not always providing us with many easy opportunities,” said Mendesh.

“But I am cautiously optimistic about this year and I believe many of the pieces are in place to make 2016 a good year for Chagala.”

So, for investors looking to tap into opportunities in Kazakhstan, look no further.

After floating towards the end of last year at 1.25p, June saw massive share price movement after its development wooed investors, reaching a zenith of 2.5p at the end of June.  The share price has now levelled off, currently standing at the 1.5p mark.

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