Petrokazakhstan 6-K Current report (foreign)

   NEWS RELEASE

FOR IMMEDIATE RELEASE – May 4, 2004
FOR:	PETROKAZAKHSTAN INC.
SUBJECT:	Financial Results for the First Quarter Ending March 31, 2004

CALGARY, Alberta – PetroKazakhstan Inc. (“PetroKazakhstan” or the “Company”) announces its financial results for the three months ending March 31, 2004.All amounts are expressed in U.S. dollars unless otherwise indicated.

HIGHLIGHTS:

l	Net income per fully diluted share increased by 30.1% over the first quarter of 2003
l	Record quarterly cash flow
l	Transportation differential significantly reduced due to KAM pipeline, use of CPC and sales to Iran
l	Four production wells drilled in the Kyzylkiya area. Extension of the Kyzylkiya field confirmed through drilling in the new Kolzhan license
l	Acquisition of new exploration acreage
l	Substantial Issuer Bid announced to repurchase C$160 million of common shares

FINANCIAL HIGHLIGHTS:

(in millions of US$ except per share amounts)	Three Months ended March 31
	2004		2003
Gross Revenue	$	321.5	$	248.9
Net income		87.5		68.6
Per share (basic)		1.11		0.87
Per share (diluted)		1.08		0.83
Cash flow		114.7		88.9
Per share (basic)		1.46		1.12
Per share (diluted)		1.42		1.08
Weight Average Shares Outstanding
Basic		78,742,750		79,082,439
Diluted		80,658,736		82,358,224
Shares Outstanding at End of Period		79,865,009		79,028,539

PetroKazakhstan is pleased to announce its financial results for the first quarter of 2004 with $87.5 million of net income, a 27.6% increase over the first quarter of 2003 and $114.7 million of cash flow, a 29.0% increase over the first quarter of 2003.

Net income and cash flow per share (diluted) increased by 30.1% and 31.5% respectively.

SUBSTANTIAL ISSUER BID/ POTENTIAL ACQUISITIONS

With a view to making a special distribution to its shareholders in the most efficient means possible, the Board of Directors has determined that the company will return to shareholders up to C$160 million by way of a substantial issuer bid to be conducted in the form of a modified “Dutch auction”.

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The bid will seek to repurchase C$160 million worth of shares at the resultant auction price. The auction pricing range will set a minimum price of C$40.00. The auction will be conducted with bid price  increments of C$0.10 above the minimum price.

The Company has applied to securities regulators in both Canada and the United States to obtain certain exemptive relief in connection with the bid and will commence the bid once approval is granted by regulators in both countries. The Company currently expects to receive such approvals in the next few weeks. PetroKazakhstan will be making an announcement of the terms and conditions of the bid when such approvals have been granted and will mail the bid documents as soon as practicable thereafter.

Considering available cash and credit lines, this share repurchase will not affect the ability of the Company to finance in due course a potential material acquisition, based on the size of potential targets currently under review. In this regard, the Company is in advanced conversations for the purchase of the 50% interest in the Kazgermunai Joint Venture, which it does not currently own and is seeking the necessary consents for the potential transaction.

UPSTREAM OPERATIONS REVIEW

Production

During the first quarter of 2004, PetroKazakhstan’s production volumes totaled 12.86 million barrels or an average of 142,919 barrels of oil per day (“bopd”) representing an increase of 1.5% over the firstquarter 2003 production of 140,765 bopd and a 13.2% decrease over the fourth quarter of 2003 production rates of 164,559 bopd. Throughout the quarter, 19 Kumkol South wells remained shut in while amutually acceptable resolution was sought with the neighbouring license holder Turgai Petroleum on operating conditions of wells located at the border between Kumkol South and Kumkol North. Atechnical regime was approved by the Regulatory Authorities of Kazakhstan in April and 17 of the wells are returning to production.

As a result of production loss to date at Kumkol and continued shut in of two wells, the company has revised its forecast of average production for year 2004 to a range of 160,000 bopd to 165,000 bopd.

Field Developments

Four production wells were drilled in the Kyzylkiya field this quarter. In addition, a well was drilled, tested and brought on production at 700 bopd from the recently acquired Kolzhan license. This well hasconfirmed a northern extension of the Kyzylkiya field; up to three further delineation wells will be drilled this year.

In the Maibulak field a series of wells have been fracture stimulated resulting in improving production rates from 150 to 900 bopd. In addition, water injection facilities have been installed and are in operation,providing reservoir pressure maintenance and 100% voidage replacement.

A gas injection system for the Aryskum field development has been designed and is under construction for completion in the second quarter of 2004. Preparations have been made for this year’s drillingcampaign of up to 16 new production wells in Aryskum, which may include a horizontal well for enhanced production and reserves exploitation.

Development of and production from the East Kumkol field is expected to recommence in the third quarter of 2004. This is subject to government approvals and conclusion of joint venture agreementswith Turgai Petroleum as the field discovered by PetroKazakhstan extends into the Kumkol North license area.

Kumkol North development continues with further well drilling and additional separation and water injection facilities to increase production up to 76,000 bopd (gross) in 2004.

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Exploration and Appraisal

A deep exploration well drilled to 3,250 meters on the Dongelek prospect, north of the Kumkol field, is the first exploration well drilled into the southern portion of the Saralyn graben to the deeper horizons. Although the well was dry, oil shows were encountered confirming the presence of hydrocarbons, which will lead to further evaluation of the prospectivity of the graben.

In March, a well was spudded on the Aryskum license to explore for hydrocarbons in horizons deeper than the main Aryskum reservoir, which could extend throughout the field. These primary deeperhorizons have still to be penetrated but already some upper sands have been encountered which, if confirmed by well logging, could be tested to determine commerciality. Already the results appear toindicate the need for other wells to investigate these previously undetermined sands. The current well should reach a total depth of 4,450 meters in early May.

Further enhanced seismic interpretation of the North Nurali field has commenced along with the installation of temporary single well production units to continue the testing and appraisal of the reservoir.The pilot production phase will involve production from five North Nurali wells in 2004. In addition, two further delineation wells are planned in the second half of the year.

New Exploration Lands

PetroKazakhstan has been awarded two exploration areas to the north and to the south of the main Kyzylkiya field totaling 146 km2. The northern area is adjacent to the Kolzhan license (referred to above) and completes the land acquisition of the extension to the main Kyzylkiya oilfield. In addition, the Company considers there to be upside potential in the Kumkol formation, which underlies the main formation in this location. A well will soon be testing the prospectivity of this deeper formation. The Company also considers there to be a small satellite to the northern field extension lying approximately two kilometers to the east. The southern area contains potential flank satellite pools similar to those of the main Kyzylkiya field. 3D seismic will be acquired in this area in 2004.

PetroKazakhstan has now received regulatory approval for becoming a 75% equity partner in License 951-D, which covers two blocks (the Doshan block and the Zhamansu block) in the South Turgai Basin over a total area of 4,290 km2. Four hundred and fifty kilometers of 2D seismic data have been acquired over the two blocks. An exploration well was spudded in the northern Doshan block south of the Aryskum field and is currently drilling. Two wells are planned in the southern Zhamansu block later in 2004.

Exploitation of Gas Resources

Following the completion of the 55-megawatt power plant in Kumkol, which exploits part of the gas previously flared from Kumkol South, South Kumkol and Kumkol North reservoirs, PetroKazakhstan continues to assess additional methods to increase gas utilization.

Evaluation has started on the feasibility of gas usage for miscible hydrocarbon injection for Enhanced Oil Recovery. A pilot project is being designed for one of the Kumkol fields. In parallel, assessment is being made of a Liquefied Petroleum Gas (LPG) facility in Kumkol.

As a 50% partner in the Kazgermunai Joint Venture, PetroKazakhstan is also participating in Kazgermunai’s LPG extraction plant for the Akshabulak field. The 30 mmscfd plant will provide 2,900 bopd of LPG and 600 bopd of condensate. The dry gas will be provided to the city of Kyzylorda through a pipeline to be constructed by KazTransGas.

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CRUDE OIL MARKETING & TRANSPORTATION

Crude Oil Logistics

Volumes shipped during the first quarter of 2004 amounted to 7.44 million barrels (962 thousand tonnes) compared to 5.24 million barrels (678 thousand tonnes) during the same period in 2003 representing an increase of 42.0%. This was due to a combination of a greater number of available routes, the additional capacity provided by the KAM pipeline and Dzhusaly terminal and less severe winter weather problems in the region. Dzhusaly, which was not operational during the first quarter of 2003, represented 70% of export shipments during the first quarter of 2004.

Although there were some shipping delays experienced by vessels passing through the Bosphorous straits due to tighter night time regulations by the Turkish authorities, generally the level of delaysseen in 2003 were not experienced during the first quarter of 2004.

Operational problems with the pipeline connecting Kumkol to the Atasu terminal, which is the most economic route for deliveries to China, restricted the volume that could be transshipped throughthis terminal. Limited shipments by rail from PetroKazakhstan rail-loading terminal at Tekesu were made to partly compensate for this.

Monthly shipments via the CPC pipeline achieved 99.9% of their contractual limit by the final month of the quarter. CPC was not an available option during the first quarter of 2003.

Deliveries to the Rey terminal at the Tehran refinery in Iran grew steadily throughout the quarter and are expected to reach their contractual limit mid 2004, once the remaining modifications to the discharge facilities at Rey are completed.

Crude Oil Prices and Transportation Differentials

International crude oil prices remained buoyant during the first quarter of 2004. Average prices for Brent under Platts quotations were $32.03 per barrel for the first quarter of 2004 compared to $31.49 perbarrel in the same period of 2003. Volatility remained high with a spread between the minimum and maximum quotations of $3.00 per barrel during the first three months of 2004. The comparable figure in 2003 was $2.19 per barrel.

Net Returns measured at the Kumkol field gate per barrel improved as a result of substantial reductions on transportation differentials.

REFINING AND REFINED PRODUCT SALES

Refinery operations were stable throughout the quarter. The volumes processed at the refinery returned to more normal levels during the first quarter of 2004. Processing at the refinery during the firstquarter of 2003 was higher than normal as a result of crude oil export restrictions during the period of severe weather disruptions. Consequently, refined product sales were reduced from 965 thousandtonnes during the first quarter of 2003 to 776 thousand tonnes during the first quarter of 2004.

The production of VGO was halted during the first quarter as VGO was classified as a diesel under customs classification and was subject to an export ban during the spring agricultural season.Negotiations were successfully held with the authorities and VGO has been de-classified as a diesel product and will no longer be subject to export restrictions. VGO production will re-commence in thesecond quarter of 2004 and the sales values of the volumes produced and shipped in the first quarter will be reflected in the second quarter results.

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MANAGEMENT DISCUSSION AND ANALYSIS (“MD&A”)

A full MD&A of the First Quarter of 2004 is available on the Company’s website and can also be obtained on application from the Company.

PetroKazakhstan Inc. is a vertically integrated, international energy company, celebrating its seventh year of operations in the Republic of Kazakhstan. It is engaged in the acquisition, exploration,development and production of oil and gas, refining of oil and the sale of oil and refined products.

PetroKazakhstan shares trade on the New York Stock Exchange, The Toronto Stock Exchange, the London Stock Exchange, and the Frankfurt exchange under the worldwide symbol PKZ. The Company’s website can be accessed atwww.petrokazakhstan.com.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

For further information please contact:

Nicholas H. Gay Senior Vice President Finance and CFO +44 (1753) 410-020 +44 77-48-633-226 (cell) Ihor P. Wasylkiw Vice President Investor Relations +1 (403) 221-8658 +1 (403) 383-2234 (cell) Jeffrey D. Auld Manager Investor Relations-Europe + 44 (1753) 410-020 + 44 79-00-891-538 (cell)

This news release contains statements that constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. You are referred to our Annual Report on Form 40-F and our other filings with the U.S. Securities and Exchange Commission and the Canadian securities commissions for a discussion of the various factors that may affect our future performance and other important risk factors concerning us and our operations.

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INTERIM CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

THREE MONTHS ENDED MARCH 31

(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)

UNAUDITED

	Three months ended
		March 31, 2004		March 31, 2003
REVENUE
Crude oil		207,478		142,242
Refined products		110,892		102,955
Service fees		2,668		1,546
Interest income		443		2,180
		321,481		248,923
EXPENSES
Production		21,447		17,256
Royalties and taxes		20,381		11,803
Transportation		64,079		55,003
Refining		3,908		3,352
Crude oil and refined product purchases		33,556		9,370
Selling		8,457		5,471
General and administrative		13,243		12,977
Interest and financing costs		7,403		14,772
Depletion and depreciation		21,333		17,628
Foreign exchange gain		(4,684	)	(2,098	)
		189,123		145,534
INCOME BEFORE INCOME TAXES		132,358		103,389
INCOME TAXES (Note 8)
Current provision		45,359		36,172
Future income tax		(1,134	)	(1,985	)
		44,225		34,187
NET INCOME BEFORE NON-CONTROLLING INTEREST		88,133		69,202
NON-CONTROLLING INTEREST		648		650
NET INCOME		87,485		68,552
RETAINED EARNINGS, BEGINNING OF YEAR		378,819		73,151
Normal course issuer bid		-		(792	)
Preferred share dividends		(9	)	(8	)
RETAINED EARNINGS, END OF PERIOD		466,295		140,903
BASIC NET INCOME PER SHARE (Note 9)		1.11		0.87
DILUTED NET INCOME PER SHARE (Note 9)		1.08		0.83

See accompanying notes to the interim consolidated financial statements.

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INTERIM CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

UNAUDITED

	As at March 31, 2004	As at December 31, 2003
ASSETS
CURRENT
Cash	206,485		184,660
Accounts receivable	174,675		150,293
Inventory	52,958		36,920
Prepaid expenses	37,476		44,901
Current portion of future income tax asset	16,305		14,697
	487,899		431,471
Deferred charges	6,318		6,729
Restricted cash (Note 5)	36,868		35,468
Future income tax asset	25,262		25,466
Property, plant and equipment	555,940		542,317
TOTAL ASSETS	1,112,287		1,041,451
LIABILITIES
CURRENT
Accounts payable and accrued liabilities	98,846		88,422
Short-term debt (Note 6)	46,173		73,225
Prepayments for crude oil and refined products	13,708		6,652
	158,727		168,299
Long-term debt	233,728		246,655
Asset retirement obligations (Note 2)	29,233		28,625
Future income tax liability	13,274		13,012
	434,962		456,591
Non-controlling interest	13,739		13,091
Preferred shares of subsidiary	80		80
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS’ EQUITY
Share capital (Note 7)	195,272		191,695
Contributed surplus	1,939		1,175
Retained earnings	466,295		378,819
	663,506		571,689
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	1,112,287		1,041,451

See accompanying notes to the interim consolidated financial statements.

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INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW

THREE MONTHS ENDED MARCH 31

(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

UNAUDITED

	Three months ended
		March 31, 2004		March 31, 2003
OPERATING ACTIVITIES
Net income		87,485		68,552
Items not affecting cash:
Depletion and depreciation		21,333		17,628
Amortization of deferred charges		387		2,693
Non-controlling interest		648		650
Other non-cash charges		5,961		1,336
Future income tax		(1,134	)	(1,985	)
Cash flow		114,680		88,874
Changes in non-cash operating working capital items		(19,560	)	15,904
Cash flow from operating activities		95,120		104,778
FINANCING ACTIVITIES
Short-term debt		(24,494	)	50,502
Purchase of common shares		-		(1,032	)
Long-term debt		(15,933	)	64,110
Deferred charges paid		-		(2,451	)
Proceeds from issue of share capital, net of share issuance costs		3,577		450
Preferred share dividends		(9	)	(8	)
Cash flow from financing activities		(36,859	)	111,571
INVESTING ACTIVITIES
Capital expenditures		(35,036	)	(47,100	)
Restricted cash		(1,400	)	-
Purchase of preferred shares of subsidiary		-		(2	)
Cash flow used in investing activities		(36,436	)	(47,102	)
INCREASE IN CASH		21,825		169,247
CASH, BEGINNING OF PERIOD		184,660		74,796
CASH, END OF PERIOD		206,485		244,043

See accompanying notes to the interim consolidated financial statements.

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS TABULAR AMOUNTS IN THOUSANDS OF DOLLARS,

UNLESS OTHERWISE INDICATED)

UNAUDITED

1	SIGNIFICANT ACCOUNTING POLICIES
	The interim consolidated financial statements of PetroKazakhstan Inc. (“PetroKazakhstan” or the “Corporation”) have been prepared by management in accordance with generally accepted accounting principles in Canada. Its main operating subsidiaries are PetroKazakhstan Kumkol Resources ("PKKR") and PetroKazakhstan Oil Products ("PKOP").Certain information and disclosures normally required to be included in the notes to the annual financial statements have been omitted or condensed. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in PetroKazakhstan’s Annual Report for the year ended December 31, 2003. The accounting principles applied are consistent with those as set out in the Corporation’s annual financial statements for the year ended December 31, 2003, except for the changein accounting standards as described in Note 2.
	The presentation of certain amounts for previous periods has been changed to conform with the presentation adopted for the current period.
2	CHANGE IN ACCOUNTING STANDARDS
	Asset Retirement Obligations
	Effective January 1, 2004, the Corporation adopted the new recommendation of the Canadian Institute of Chartered Accountants (“CICA”) regarding asset retirement obligations. Thisnew standard changes the method of estimating and accounting for future site restoration costs. Total estimated asset retirement obligations are discounted to estimate the fair value ofthe obligation and recorded as a liability when the related assets are constructed and commissioned. The fair value increases the value of property, plant and equipment and is depletedover the life of the asset. Accretion expense, resulting from the changes in the present value of the liability due to the passage of time is recorded as part of interest and financing costs.
	Estimated cash flows are discounted at 8.5%. The total undiscounted estimated cash flows required to settle the obligations is $73.0 million with the expenditures being incurred overten years commencing in 2014.

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The new standard has been applied retroactively, and the financial statements of prior periods have been restated.

Adoption of the new standard of accounting for asset retirement obligations resulted in the following changes in the consolidated balance sheet and statement of income and retained earnings.

Changes in consolidated balance sheets:

Increase / (decrease)

	As at March 31, 2004		As at December 31, 2003
Future income tax asset	806		651
Property, plant and equipment	15,000		15,181
Total assets	15,806		15,832
Asset retirement obligations	22,667		22,058
Retained earnings	(6,861	)	(6,226	)
Total liabilities and shareholders' equity	15,806		15,832

Changes in consolidated statements of income and retained earnings for the three months ended March 31, 2004 and 2003:

Increase / (decrease)

	Three months ended March 31
		2004		2003
Interest and financing costs		608		513
Depletion and depreciation		181		(1,086	)
Income before income taxes		789		573
Income taxes		154		245
Net income		(635	)	328
Basic net income per share		(0.01	)	0.01
Diluted net income per share		(0.01	)	-

The change in asset retirement obligations is as follows:

Asset retirement obligations liability as at January 1, 2003	22,831
Revisions	3,670
Accretion expense	2,124
Settlements	-
Asset retirement obligations liability as at January 1, 2004	28,625
Revisions	-
Accretion expense	608
Settlements	-
Asset retirement obligations liability as at March 31, 2004	29,233

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	Full Cost Accounting In September 2003 the CICA issued Accounting Guideline 16 "Oil and Gas Accounting - Full Cost" ("AcG 16"), which replaced Accounting Guideline 5 "Full Cost Accounting in the Oil and Gas Industry" ("AcG 5"). The most significant change between AcG 16 and AcG 5 is that under AcG 16 the carrying value of oil and gas properties should not exceed their fair value. The fair value is equal to estimated future cash flows from proved and probable reserves using future price forecasts and costs discounted at a risk-free rate. This differs from the cost recovery ceiling test under AcG 5 that used undiscounted cash flows, and constant prices, less general and administrative, financing costs and taxes. The Corporation adopted AcG 16 effective January 1, 2004 and as at March 31, 2004 there were no indications of impairment. Impairment of Long-Lived Assets Effective January 1, 2004, the Corporation adopted the new recommendation of the CICA on impairment of long-lived assets issued in December 2002. This recommendation provides guidance on the recognition, measurement and disclosure of impairment of long-lived assets. There is a requirement to recognize an impairment loss for a long-lived asset when its carrying amount exceeds the sum ofthe undiscounted cash flows expected from its use and eventual disposition. The impairment loss is measured as the amount by which carrying amount of the asset exceeds its fair value. As at March 31, 2004 there were no indications of impairment of long-lived assets. Hedge Accounting Effective January 1, 2004, the Corporation adopted Accounting Guideline 13 "Hedging Relationships" (AcG 13"). AcG 13 provides guidance regarding the identification, designation, documentationand effectiveness of hedging relationships for the purposes of applying hedge accounting. This guideline establishes certain conditions for when hedge accounting may be applied. The Corporation has applied hedge accounting for the financial instruments disclosed in Note 10.
3	SEGMENTED INFORMATION
	On a primary basis the business segments are:
	l	Upstream comprising the exploration, development and production of crude oil and natural gas.
	l	Downstream comprising refining and the marketing and transportation of refined products and the management of the marketing and transportation of crude oil.
	Upstream results include revenue from crude oil sales to Downstream, reflected as crude oil purchases in Downstream, as this presentation properly reflects segment results. This revenueis eliminated on consolidation.

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Three months ended March 31, 2004
	Upstream		Downstream		Corporate		Eliminations		Consolidated
REVENUE
Crude oil	224,136		-		-		(16,658	)	207,478
Refined products	30,864		91,974		-		(11,946	)	110,892
Service fee	2,417		180		71		-		2,668
Interest income	132		34		277		-		443
	257,549		92,188		348		(28,604	)	321,481
EXPENSES
Production	21,447		-		-		-		21,447
Royalties and taxes	16,510		3,871		-		-		20,381
Transportation	64,079		-		-		-		64,079
Refining	-		3,908		-		-		3,908
Crude oil and refined product purchases	34,980		27,180		-		(28,604	)	33,556
Selling	4,125		4,332		-		-		8,457
General and administrative	7,343		3,364		2,536		-		13,243
Interest and financing costs	6,934		469		-		-		7,403
Depletion and depreciation	16,153		4,869		311		-		21,333
Foreign exchange loss (gain)	8,472		(13,610	)	454		-		(4,684	)
	180,043		34,383		3,301		(28,604	)	189,123
INCOME (LOSS) BEFORE INCOME TAXES	77,506		57,805		(2,953	)	-		132,358
INCOME TAXES
Current provision	31,908		11,883		1,568		-		45,359
Future income tax	(6,011	)	4,877		-		-		(1,134	)
	25,897		16,760		1,568		-		44,225
NON-CONTROLLING INTEREST	-		648		-		-		648
NET INCOME (LOSS)	51,609		40,397		(4,521	)	-		87,485

Revenue eliminations are intersegment revenue.

Three months ended March 31, 2004	Export	Domestic	Consolidated
Crude oil	190,334	17,144	207,478
Refined products	32,392	78,500	110,892

As at March 31, 2004	Upstream	Downstream	Corporate	Consolidated
Total assets	798,430	171,311	142,546	1,112,287
Total liabilities	391,518	50,870	6,393	448,781
Capital expenditures in the period	35,575	3,268	282	39,125

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Three months ended March 31, 2003

	Upstream		Downstream		Corporate		Eliminations		Consolidated
REVENUE
Crude oil	176,459		-		-		(34,217	)	142,242
Refined products	670		103,689		-		(1,404	)	102,955
Service fee	691		847		8		-		1,546
Interest income	1,830		42		308		-		2,180
	179,650		104,578		316		(35,621	)	248,923
EXPENSES
Production	17,256		-		-		-		17,256
Royalties and taxes	9,415		2,388		-		-		11,803
Transportation	55,027		(24	)	-		-		55,003
Refining	-		3,352		-		-		3,352
Crude oil and refined product purchases	2,104		42,887		-		(35,621	)	9,370
Selling	2,017		3,454		-		-		5,471
General and administrative	7,788		4,166		1,023		-		12,977
Interest and financing costs	5,567		487		8,718		-		14,772
Depletion and depreciation	12,932		4,670		26		-		17,628
Foreign exchange loss (gain)	(1,374	)	(966	)	242		-		(2,098	)
	110,732		60,414		10,009		(35,621	)	145,534
INCOME (LOSS) BEFORE INCOME TAXES	68,918		44,164		(9,693	)	-		103,389
INCOME TAXES
Current provision	24,169		11,771		232		-		36,172
Future income tax	(1,969	)	(16	)	-		-		(1,985	)
	22,200		11,755		232		-		34,187
NON-CONTROLLING INTEREST	-		650		-		-		650
NET INCOME (LOSS)	46,718		31,759		(9,925	)	-		68,552

Included in Upstream crude oil revenue are sales to one customer in the amount of $27.3 million. Revenue eliminations are intersegment revenue.

Three months ended March 31, 2003	Export	Domestic	Consolidated
Crude oil	142,242	-	142,242
Refined products	21,869	81,086	102,955

As at March 31, 2003	Upstream	Downstream	Corporate	Consolidated
Total assets	685,378	187,396	29,129	901,903
Total liabilities	488,199	62,952	9,624	560,775
Capital expenditures in the period	44,571	5,591	159	50,321

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4	JOINT VENTURES
	The Corporation has the following interests in two joint ventures:
	a)	a 50% equity shareholding with equivalent voting power in Turgai Petroleum CJSC (“Turgai”), which operates the northern part of the Kumkol field in Kazakhstan.
	b)	a 50% equity shareholding with equivalent voting power in LLP Kazgermunai (“Kazgermunai”), which operates three oil fields in Kazakhstan: Akshabulak, Nurali and Aksai.

The following amounts are included in the Corporation’s consolidated financial statements as a result of the proportionate consolidation of its joint ventures before consolidation eliminations:

Three months ended March 31, 2004	Turgai	Kazgermunai	Total
Cash	18,681	28,010	46,691
Current assets, excluding cash	41,570	35,994	77,564
Property, plant and equipment, net	81,831	65,725	147,556
Current liabilities	79,880	13,900	93,780
Long-term debt	-	38,353	38,353
Revenue	59,635	38,535	98,170
Expenses	41,279	22,929	64,208
Net income	18,356	15,606	33,962
Cash flow from operating activities	11,260	19,780	31,040
Cash flow used in financing activities	-	-	-
Cash flow used in investing activities	(949)	(2,203)	(3,152)

Revenue for the three months ended March 31, 2004 includes $10.3 million of crude oil sales made by Turgai to Downstream. This amount was eliminated on consolidation.

Three months ended March 31, 2003	Turgai	Kazgermunai	Total
Cash	150	11,708	11,858
Current assets, excluding cash	7,205	14,661	21,866
Property, plant and equipment	52,024	60,935	112,959
Current liabilities	18,607	3,073	21,680
Long-term debt	-	46,078	46,078
Revenue	30,216	22,134	52,350
Expenses	22,559	12,689	35,248
Net income	7,657	9,445	17,102
Cash flow from operating activities	10,059	12,763	22,822
Cash flow used in financing activities	-	-	-
Cash flow used in investing activities	(10,216)	(3,909)	(14,125)

Revenue for the three months ended March 31, 2003 includes $9.1 million of crude oil sales made by Turgai and $0.5 million of crude oil sales made by Kazgermunai to Downstream. These amounts were eliminated on consolidation.

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5	RESTRICTED CASH
	Restricted cash includes $10.5 million of cash dedicated to a debt service reserve account for the Corporation's Term Facility ($10.5 as at December 31, 2003). This cash is not availablefor general corporate purposes until the Term Facility is repaid in full.
	Restricted cash as at March 31, 2004 includes $26.4 million of cash dedicated to a margin account for the hedging program ($25.0 million as at December 31, 2003).
6	SHORT-TERM DEBT

	March 31, 2004	December 31, 2003
Current portion of term facility	33,143	35,692
Current portion of term loans	2,030	2,039
Joint venture loan payable	11,000	11,000
PKOP bonds	-	24,494
	46,173	73,225

	The PKOP bonds were fully redeemed on February 26, 2004.
7	SHARE CAPITAL
	Authorized share capital consists of an unlimited number of Class A common shares, and an unlimited number of Class B redeemable preferred shares, issuable in series.

Issued Class A common shares:
	Three months ended
	March 31, 2004			March 31, 2003
		Number	Amount		Number		Amount
Balance, beginning of period		77,920,226	191,695		78,956,875		193,723
Shares repurchased and cancelled pursuant to normal course issuer bid		-	-		(98,100	)	(240	)
Stock options exercised for cash		1,916,225	3,567		166,500		447
Corresponding convertible securities, converted		28,558	10		3,264		3
Balance, end of period		79,865,009	195,272		79,028,539		193,933

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A summary of the status of the Corporation's stock option plan as of March 31, 2004 and the changes during the three months ended March 31, 2004 and the year ended December 31, 2003 are presented below (expressed in Canadian dollars):

	Options		Weighted Average Exercise Price
Outstanding at December 31, 2002	4,850,136		5.01
Granted	791,000		25.82
Exercised	(440,751	)	3.76
Forfeited	(84,925	)	9.27
Outstanding at December 31, 2003	5,115,460		8.17
Granted	60,000		31.62
Exercised	(1,944,783	)	2.42
Forfeited	(64,225	)	12.31
Outstanding at March 31, 2004	3,166,452		12.07
Options exercisable as at:
December 31, 2003	2,816,683		5.14
March 31, 2004	867,546		2.93

8	INCOME TAXES
	The provision for income taxes differs from the results, which would have been obtained by applying the statutory tax rate of 30% to the Corporation's income before income taxes. This difference results from the following items:

	Three months ended
		March 31, 2004		March 31, 2003
Statutory Kazakhstan income tax rate		30	%	30	%
Expected tax expense		39,708		31,017
Permanent differences, net		4,517		3,170
Income tax expense		44,225		34,187

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9	NET INCOME PER SHARE
	The net income per share calculations are based on the weighted average and diluted numbers of Class A common shares outstanding during the period as follows:

	Three months ended
		March 31, 2004	March 31, 2003
Weighted average number of common shares outstanding		78,742,750	79,082,439
Dilution from exercisable options (including convertible securities)		1,915,986	3,275,785
Diluted number of shares outstanding		80,658,736	82,358,224

	No options were excluded from the calculation of diluted number of shares outstanding for the three months ended March 31, 2004 and 2003, as the market price was in excess of exercise price.
10	FINANCIAL INSTRUMENTS
	The Corporation has entered into a commodity-hedging program where it is utilizing derivative instruments to manage the Corporation’s exposure to fluctuations in the price of crude oil. The Corporation has entered into the following contracts with a major financial institution.

Contract Amount (bbls per month)	Contract Period	Contract Type	Price Ceiling or Contracted Price	Price Floor
75,000	January 2004 to December 2004	Zero cost collar	28.00	17.00
75,000	January 2004 to December 2004	Zero cost collar	29.00	17.00
75,000	January 2004 to December 2004	Zero cost collar	29.25	17.00
37,500	January 2004 to December 2004	Zero cost collar	29.60	17.00
110,000	January 2004 to December 2004	Zero cost collar	30.20	18.00
120,000	January 2005 to March 2005	IPE Future	26.30-26.52
40,000	April 2005 to June 2005	IPE Future	25.92
458,333	January 2005 to December 2005	IPE Future	25.65-25.90
362,000	January 2004 to March 2004	Dated Brent	29.80-29.82

	During the three months ended March 31, 2004, the Corporation has foregone revenue of $5.2 million through these contracts.
11	CASH FLOW INFORMATION
	Interest and income taxes paid:

	Three months ended
		March 31, 2004	March 31, 2003
Interest paid		12,134	15,142
Income taxes paid		42,413	25,418

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12	COMMITMENTS AND CONTINGENCIES
	Agency for Regulation of Natural Monopolies and Protection of Competition (“ARNM”)
	PKOP
	The ARNM alleged that PKOP charged prices for refined oil products that in total were $6.3 million in excess of ARNM authorized maximum prices. The Corporation has always taken theposition that the ARNM does not have the right to establish prices for PKOP under the terms of the Privatization Agreement relating to the Shymkent refinery, which operates in a highlycompetitive environment. PKOP initiated legal proceedings to annul the ARNM claim and the court of first instance reduced the ARNM claim to approximately $1.1 million. PKOP and the ARNM appealed this decision to the Supreme Court. The Supreme Court recognized approximately $3.6 million of the ARNM’s original assessment. This amount has been providedfor in the financial statements.
	PKOP received an additional assessment from ARNM in the amount of $8.8 million for allegedly charging prices for refined products in excess of ARNM authorized maximum prices. PKOP plans to appeal this assessment. No provision has been made in the accompanying financial statements in respect of this assessment.
	PKOP’s position remains that the ARNM does not have the right to establish prices for the refinery, and the Corporation, as the party in interest under the Privatization Agreement for the Shymkent Refinery, has notified the Government of Kazakhstan that it is in breach of provisions of the Privatization Agreement. The Corporation has the right to proceed to internationalarbitration under the terms of the Privatization Agreement.
	Group companies
	The ARNM claimed $31 million from a group company for allegedly violating Kazakhstan’s competition law. The Corporation initiated legal proceedings and the court of first instancedismissed the ARNM claim. The ARNM has appealed this decision. The date to hear this appeal has not been set.
	The ARNM claimed approximately $91.4 million from group companies for allegedly violating Kazakhstan’s competition law. The group companies initiated legal action, and at theAstana City Court they were unsuccessful in their challenge of allegations by the ARNM that these companies had violated Kazakhstan competition laws. The judgment upheld theARNM determination that these distributors had received unjustified revenues totaling approximately $91.4 million. The Corporation appealed this judgment to the Supreme Court.
	It remains the Corporation's view that the allegations are without justification; a highly competitive market exists for oil products within Kazakhstan and the current level of prices reflectscurrent world crude oil prices, which are close to their historical high. Also, the prices charged by the group companies are competitive with Russian imports and with those chargedby distributors of the other two refineries in Kazakhstan.
	The Corporation is considering its recourse rights under the terms of the Shymkent refinery Privatization Agreement, which clearly stipulates the right to sell any and all its products in Kazakhstan and abroad at free market prices.

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The Corporation will continue to seek a dialogue with the appropriate authorities to address the concerns related to the pricing of refined products and possible measures to be taken

to further promote transparency and effective monitoring of the dynamics of competition, consistent with market economy principles.

13	SUBSEQUENT EVENTS
	The Supreme Court hearing for the ARNM claim of $91.4 million was held in April 2004 and the Court suspended the case but instructed the parties to seek an agreed settlement.

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