JPMorgan - KASE

perform a quarterly ceiling test. The ceiling test as at September 30, 2002 demonstrated that
future net revenues exceed the carrying value of the Upstream properties under the full cost
method of accounting.
Income Before Income Taxes
As a result of the foregoing factors, we had income before income taxes of $190.1 million for the
nine months ended September 30, 2002, as compared to $211.1 million for the nine months
ended September 30, 2001.
Unusual Items
We were named as defendant in a claim filed by a company alleging it was retained under a
consulting contract, as disclosed in note 16 to our consolidated financial statements for the year
ended December 31, 2001 included elsewhere in this offering memorandum. The arbitration
decision was received in 2002 and we have accrued and paid $7.1 million for full settlement of
the claim. During 2001, we incurred $6.0 million in costs defending ourselves from a potential
takeover bid.
Income Taxes
The following table sets out the breakdown of total income tax charges:
Nine Months Ended
September 30, 2002
Nine Months Ended
September 30, 2001
($000’s)
Upstream .......................................... 53,369 21,032
Downstream ....................................... 15,478 41,472
Corporate ......................................... 2,171 1,174
Total .............................................. 71,018 63,678
The $7.3 million increase in total income tax reflected the nondeductibility for tax purposes of
interest paid on the Senior Notes.
The corporate tax expense mainly relates to taxes paid by Hurricane Overseas Services, the
company that provides services to our operating subsidiaries in Kazakhstan.
Net Income
As a result of the foregoing factors, we had net income for the nine months ended September
30, 2002 of $117.4 million compared to net income of $146.3 million for the nine months ended
September 30, 2000.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
For 2001, we generated $169.3 million of net income and $194.7 million of cash flow ($146.3
million after giving effect to changes in non-cash operating working capital items) compared to
net income of $154.9 million and cash flow of $179.4 million ($211.0 million after giving effect to
changes in non-cash operating working capital items) for 2000.
Revenue, Production and Sales
Our revenues were $603.1 million for the year ended December 31, 2001, which represented an
increase of $79.9 million, or 15.3%, over revenues of $523.2 million in 2000. The overall increase
in revenues was primarily due to a $125.2 million increase in revenue from the sales of refined
products, as well as a $3.7 million increase in revenue from interest and other income. The
increase in revenue was partially offset by a $48.2 million decrease in revenue from crude oil
sales. Revenue processing fees remained relatively constant between 2000 and 2001, decreasing
only $0.9 million.
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