JPMorgan - KASE

fully prohibit us from doing so. In addition, the terms of the indenture will permit us to
repurchase our capital stock, pay dividends in respect thereof or make investments of a material
amount without substantial restrictions. This new indebtedness and such payments could
materially increase the risks described above. See “Description of the Notes — Certain
Covenants” and “Description of Certain Financing Arrangements.”
In addition, certain of our financing arrangements impose operating and financial restrictions on
our business. These provisions require us to maintain ratios of net debt and gross interest
expense to cash flow. These provisions may negatively affect our ability to react to changes in
market conditions, take advantage of business opportunities we believe to be desirable, obtain
future financing, fund needed capital expenditures, significantly increase research and
development expenditures, or withstand a continuing or future downturn in our business. For a
discussion of our material financing arrangements other than the notes, see “Description of
Certain Financing Arrangements.“
Our ability to repay or refinance our debt and to meet our debt service obligations in the future
will depend on our successful financial and operating performance and on our ability to
successfully implement our business strategy. Our financial and operational performance depends
upon a number of factors, including factors that are beyond our control. These factors include:
Š fluctuations in oil prices, exchange rates and interest rates;
Š volatility in refining and marketing margins;
Š the success of our exploration, development and production programs;
Š any operating difficulties, increased operating costs or pricing pressures we may
experience;
Š the passage of legislation, change in oil and gas pricing policies or other regulatory
developments that may adversely affect us;
Š any delays in implementing strategic projects; and
Š general political, social, economic and business conditions in Kazakhstan and the region.
We cannot assure you that our cash flow and capital resources will be sufficient to make our debt
service payments, to repay our debt and make necessary capital expenditures, including
development and improvement expenditures which are required under our various licenses. If we
are unable to generate sufficient cash flow in the future, we may be forced to reduce or delay
our capital expenditures, to refinance all or a portion of our existing debt, including the notes, to
sell some of our assets or to obtain additional financing. We cannot assure you that any
refinancing would be possible or that we could sell our assets or obtain additional financing.
If we are unable to comply with the restrictions and covenants in our debt agreements, there
could be a default under the terms of these agreements, which could result in acceleration of
payment of funds that we have borrowed or termination of such agreements.
If we are unable to comply with the restrictions and covenants in our current or future debt and
other agreements, there would be a default under the terms of these agreements. Our ability to
meet our financial ratios and tests may be affected by events beyond our control. We cannot
assure you that we will be able to meet these tests. In the event of a default under these
agreements, the parties could terminate their commitments to lend to us or accelerate the loans
and declare all amounts borrowed due and payable or terminate the agreements as the case may
be. Agreements that contain cross-acceleration or cross-default provisions may be accelerated
and become due and payable. If any of these events occur, we cannot assure you that our assets
would be sufficient to repay in full all of our indebtedness, including HKM’s indebtedness to the
issuer under the intercompany loan, or that we would be able to find alternative financing. Even
if we could obtain alternative financing, we cannot assure you that it would be on terms that are
favorable or acceptable to us.
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