CALGARY (CP) -- Second quarter profits at PetroKazakhstan Inc. rose 14% despite lower production, but the Canadian-based energy company remained tight-lipped about its ongoing study into a possible merger or sale.
PetroKazakhstan [TSX:PKZ; NYSE:PKZ], which operates solely in the central Asian country of Kazakhstan, said Thursday that net profit for the quarter ending June 30 was $138.7 million or C$2.19 per share. This compares to C$122 million or C$1.77 a share in the same three-month period of 2004.
The earnings improvement came even though a ruling from Kazakh regulators in late April forced the company to immediately stop flaring gas - a move that slashed production by 30% - to 106,000 barrels per day from 151,000 barrels in the same period last year.
''We had a fairly good quarter performance under the circumstances that were marked, obviously, by the production reductions,'' chief executive Bernard Isautier told analysts Thursday.
Isautier said the flaring ban, expected to reduce yearly production by more than 35%, will likely remain for the foreseeable future until the company finishes building infrastructure to capture more of the gas production in 2006.
''I don't have an indication that we are close to a resolution,'' Isautier said of the dispute with Kazakh regulators over the flaring issue.
PetroKazakhstan officials also refused to shed further light on the progress being made by an independent board committee evaluating the merits of a potential sale or merger of the company.
''Unfortunately I cannot say with whom we are talking, or the number of people _ this is very sensitive and we have to be in the best interests of you shareholders,'' Isautier told analysts. ''I think we have to let the process follow its course.''
One of the companies that has admitted to an interest in acquiring PetroKazakhstan is India's state-owned Oil & Natural Gas Corp. Petro-China, another large state-owned energy producer, is also said to be a potential suitor.
PetroKazakhstan also said Thursday that its exploration program has had ''very successful results,'' particularly several wells drilled in the Kyzylkiya field in Kazakhstan.
The company's revenue increased to C$509.6 million from C$406.3 million during the second quarter, due to higher oil prices while cash flow rose to C$164.4 million, up from C$143.1 million in 2004.
PetroKazakhstan also bought back 1.8 million shares at an average of C$41.30 each during the quarter as part of its normal course issuer bid program.
The company, formerly known as Hurricane Hydrocarbons, is one of the largest foreign energy companies operating in Kazakhstan and has been there for the last eight years.
But PetroKazakhstan has had a variety of high-profile troubles this year, which have slashed its share price, leading to the late-June announcement that it was examining possible takeover bids.
Along with the flaring issue, the company has been publicly scrapping with Russian oil giant Lukoil over a joint venture called Turgai Petroleum. Both sides have filed multi-million dollar claims against each other.
And for years, the company has been accused by Kazakh authorities of violating the country's anti-monopoly laws, resulting in several multimillion-dollar fines and criminal charges being laid in April against two executives.
PetroKazakhstan said earlier this month that it continues to strive for a final settlement on the price-fixing allegations that would ''clear the books'' on both the civil and criminal matters.
In Thursday trading on the Toronto stock market, PetroKazakhstan shares rose 68 cents to C$51.04 as the stock continues to gain value throughout the month of July.
(c) The Canadian Press 2005
