JPMorgan - KASE

Š refurbishing and recommissioning a vacuum gas oil distillation unit to reduce production
of lower margin products;
Š installing additional equipment to enhance product quality; and
Š implementing new processes to increase energy efficiencies in order to reduce our refining
costs.
Reduce overhead and operating costs. We have eliminated the remaining overlap between the
operations of our principal operating subsidiaries, HKM and HOP, by establishing our joint
marketing team. In addition, in accordance with established western management practices, we
intend to outsource many service activities that we currently perform to support our Upstream
and Downstream operations and to divest non-core businesses and assets.
Selectively seek acquisition opportunities. We believe our integrated operations and leading
position as a producer in the South Turgai Basin will create opportunities for additional growth
through selective acquisitions. As part of our strategy to increase our reserves and production, we
will pursue opportunities to acquire additional reserves from third parties. To date, our
acquisition strategy has focused on acreage and assets, both producing and of exploration
potential, within the vicinity of our current oil fields. We intend to pursue selective acquisitions
throughout Kazakhstan.
Effectively exploit our natural gas reserves. We have implemented a gas utilization program
designed to reduce the flaring of gas produced from our fields and the consequential release of
pollutants into the environment, and to help us meet our power needs. We expect this program
to provide us with a more reliable and lower cost power source for our field operations, power
for the Shymkent refinery through swaps, and the opportunity to sell power to third parties.
Corporate Development
Operating Structure
We were incorporated under the laws of the province of Alberta, Canada in 1986, as a subsidiary
of Brana Oil & Gas Ltd., formerly a public oil and gas company listed on the Alberta Stock
Exchange. Our corporate headquarters are located at Suite 1460, SunLife Plaza, North Tower,
140 - 4 th Avenue S.W., Calgary, Alberta, Canada T2P 3N3, and our telephone number is
(403) 221-8435.
We conduct substantially all of our operations through, and substantially all of our assets are
currently held directly or indirectly by, HKM, except for our stake in Turgai Petroleum CJSC,
through which we hold our interest in Kumkol North. Our principal operating subsidiaries are:
Š Hurricane Kumkol Munai OJSC, which is responsible for our Upstream operations in
Kazakhstan, including the development and production of crude oil reserves. We own
100% of the common shares of HKM, which represent 89.5% of the voting shares, and
39% of the preferred shares, which represent 4.1% of the voting shares. As of
September 30, 2002, we held 93.6% of the voting shares of HKM. The balance of the
preferred shares of HKM are held by current and former employees of HKM.
Š Hurricane Oil Products OJSC, formerly OJSC Shymkentnefteorsyntez, which is responsible
for Hurricane’s Downstream operations in Kazakhstan. HOP owns and operates the
Shymkent refinery and a wide network of marketing and distribution centers. We own
indirectly 96.7% of the common voting shares of HOP. The remaining voting shares of HOP
are held by private investors. There are also non-voting preferred shares outstanding held
by current and former employees of HOP.
The HKM Acquisition
In 1996, Hurricane Kumkol Limited, one of our wholly owned subsidiaries, purchased all the
common stock of HKM from the Republic of Kazakhstan. On December 12, 1996, we completed
the acquisition of HKM, effective November 30, 1996, for an aggregate purchase price of
$120.0 million. As part of this acquisition, we acquired:
Š a 100% interest in Kumkol South;
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