LONDON--Kazakhstan's state-owned oil and gas company
KazMunaiGaz, or KMG, said on Monday it is withdrawing its proposed
offer to take its listed exploration unit private, blaming oil
price volatility and the inability to agree an acquisition
price.
Oil prices have more than halved since June 2014, and while
analysts and industry executives expect a surge in merger activity
this year, the volatility in share prices has already derailed some
potential deals.
KMG's offer, which was announced in July, was a critical step
toward the Kazakh government floating the entire company, a goal
the government and senior KMG officials have underscored repeatedly
in recent years.
KMG, Central Asia's largest oil and gas company, has a stake in
the giant Kashagan oil field, which remains out of commission
because of pipeline leaks despite more than $50 billion in
spending. Western oil majors, including Exxon Mobil Corp., Royal
Dutch Shell PLC, Eni SpA and Total SA, also have stakes in
Kashagan.
In July, KMG proposed to buy the 37% of KMG EP it didn't already
own for $18.50 a share. The offer represented a 15.1% premium to
KMG EP's share price on July 21.
KMG officials had been hoping to reintegrate the exploration
subsidiary for several years in an effort to simplify the parent
company's balance sheet and operations in advance of a potential
initial public offering, likely in London, people familiar with the
matter have said.
KMG said Monday it will continue to support the development of
KMG EP.
"KMG continues to believe that the reintegration of KMG EP into
KMG remains a sensible strategic goal for all shareholders," it
said.
KMG EP produced around 250,000 barrels of oil a day in 2013, but
its production has stagnated for years while the company's reserves
base has shrunk since 2008.
Write to Selina Williams at selina.williams@wsj.com
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