KazMunayGas published its financial results for the fourth quarter of 2025. We assess the report as neutral: the strengthening of the tenge at the end of the year predictably resulted in foreign exchange losses, which sharply reduced quarterly net profit by 65% year-on-year. Excluding currency revaluation, the picture looks more restrained, with the EBITDA margin remaining roughly at the level of previous quarters. We also note a reduction in the debt burden to the lowest level in many years. In our valuation model, we significantly increased oil price forecasts for the next three years while reducing the discount to the benchmark price. We also improved the valuation models for Tengizchevroil (TCO) and Caspian Pipeline Consortium (CPC) based on their 2025 results. At the same time, the forecast exchange rate for the U.S. dollar was lowered. As a result, the updated target price for one KazMunayGas share is KZT 41,700, implying 32% upside from the current market price. Recommendation: Buy.
Key valuation drivers
The main catalyst is the continued ramp-up of production at the Tengiz field following the launch of the Third Generation Plant. Production attributable to KMG at TCO increased 35% year-on-year in the fourth quarter, while KMG’s share in TCO profit reached KZT 122 billion (+14% YoY). We also note a sharp 124% YoY increase in CPC revenues in 2025 amid higher volumes of Tengiz oil transportation. A record-low debt burden and a cash cushion exceeding KZT 3 trillion create room for higher dividends to shareholders. Another obvious catalyst is the current elevated oil prices. On the other hand, oil prices could decline sharply if the current geopolitical factor proves temporary and quickly disappears from traders’ radar. Nevertheless, in this version of our valuation model we assume oil prices will remain elevated this year. The strengthening of the tenge continues to have a negative effect, reducing projected tenge revenues from oil sales. Another significant risk is the negative impact of the war in Ukraine on CPC operations.
Revenue: growth driven by FX and refined products
Quarterly revenue amounted to KZT 2.3 trillion (+17% YoY, -10% QoQ). The annual growth was largely driven by a 5% depreciation of the average tenge exchange rate against the dollar, partially offsetting lower oil prices in USD terms. Revenue from crude oil sales increased 8.3% YoY to KZT 1.1 trillion, while revenue from refined products rose 30% YoY to KZT 979 billion, supported by higher processing volumes at Romanian refineries (+8% YoY). The 10% QoQ decline in revenue was due to a 9.7% QoQ decrease in the average tenge oil price. Oil production at operating assets remained stable at 3,626 thousand tons (-1% YoY), while production at megaprojects increased 28% YoY due to the Tengiz expansion project. However, scheduled maintenance at Tengiz in October resulted in a 6.4% QoQ decline in megaproject production. The share of profit from joint ventures and associates rose to KZT 220 billion (+78% YoY, +4% QoQ), mainly due to CPC, TCO, and Valsera Holdings. Refining volumes totaled 5,211 thousand tons (+3.5% YoY, +3.4% QoQ), while oil transportation reached 18,385 thousand tons (+4.9% YoY, +0.9% QoQ). Total KMG revenue including other income amounted to KZT 2.6 trillion (+21% YoY, -7.2% QoQ).
Profitability
Net operating expenses increased 31% YoY. The most notable growth was in the cost of purchased oil and petroleum products (+15% YoY), production costs (+16% YoY, including wages +11% and electricity +21%), and depreciation (+28% YoY). Transportation costs increased 30% YoY. Adjusted EBITDA totaled KZT 334 billion (-5% YoY, -55% QoQ), while the EBITDA margin including joint ventures slightly declined to 23.4% from 23.9% in Q3. The main hit to net profit came from foreign exchange losses: a loss of KZT 163 billion, compared with a profit of KZT 129 billion a year earlier and KZT 102 billion in the previous quarter. Financial expenses rose to KZT 120 billion (+31% YoY, +43% QoQ). As a result, net profit attributable to KMG shareholders amounted to KZT 78 billion (-65% YoY, -82% QoQ), or KZT 128 per share. Free cash flow totaled KZT 138 billion (-26% YoY). Long-term debt declined 11% YoY to KZT 3,244 billion following the early redemption of Eurobonds. Net debt fell 23% QoQ, and the net debt/EBITDA ratio dropped to 0.16x, the lowest level in many years.
Our view
We view KMG’s financial results as neutral, as the decline in quarterly net profit due to FX effects was expected. The most positive factor now is the continued reduction of the debt burden and accumulation of cash balances. This increases the likelihood of higher dividends, even though the average oil price in 2025 was below $70 per barrel, which does not obligate the company to maintain last year’s dividend level. The current increase in oil prices, along with an additional premium on Urals and CPC Blend, should have a strong positive impact on financial performance. The main change in our valuation model is the increase in oil price forecasts for the next 10 years, followed by a gradual decline to previous long-term levels of $68–73 per barrel. Updating valuation models for TCO and CPC also had a positive impact, as their 2025 margins were significantly higher than our previous expectations. However, further appreciation of the tenge reduced the final tenge-denominated valuation of KMG. Overall, these changes led to an updated target price of KZT 41,700 per share, implying 32% upside from the current market price. Recommendation: Buy.