The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our Consolidated Financial Statements and the accompanying notes included in this Form 10-Q contain additional information that should be referred to when reviewing this material and this document should be read in conjunction with the Form 10-K of the Company for the year ended March 31, 2009.

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Rule 175 promulgated thereunder, that involve inherent risks and uncertainties. Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "seek," "could," "should," "predict," "continue," "future," "may" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors that could cause actual results, performance or events to differ materially from any results, performance or events expressed or implied by such forward-looking statements. All forward-looking statements are qualified in their entirety by reference to the factors discussed in this report and identified from time to time in our filings with the SEC including, among others, the following risk factors:

• substantial or extended decline in oil prices;
• inaccurate reserve estimates;
• inability to enter a production contract with the Republic of Kazakhstan;
• drilled prospects may not yield oil or natural gas in commercial quantities;
• substantial losses or liability claims as a result of operations;
• insufficient funds to meet our liquidity needs or to repay debts as they come due;
• complex laws that could affect the cost of doing business;
• substantial liabilities to comply with environmental laws and regulations;
• the need to replenish older depleting oil and natural reserves with new oil and natural gas reserves;
• inadequate infrastructure in the region where our properties are located;
• unavailability or high cost of drilling rigs, equipment, supplies, personnel and oil field services;
• unavailability or high price of transportation systems;
• competition in the oil and gas industry; and
• adverse government actions, imposition of new, or increases in existing, taxes and duties, political risks, expropriation of assets and risks of civil war, primarily in the Republic of Kazakhstan.

The above factors may affect future results, performance, events and the accuracy of any forward-looking statement. This list is illustrative but not exhaustive. In addition, new risks and uncertainties may arise from time to time. Accordingly, readers should not place undue reliance on any forward-looking statement.

Any forward-looking statement speaks only as of the date on which it is made and is expressly qualified by these cautionary statements. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement for any reason or to update the reasons actual results could differ materially from those anticipated in such forward-looking statements, even if new information becomes available in the future.

Overview

BMB Munai, Inc. is organized under the laws of the State of Nevada. Our business activities focus on oil and natural gas exploration and production in the Republic of Kazakhstan (sometimes also referred to herein as the "ROK" or "Kazakhstan"). We hold an exploration contract that allows us to conduct exploratory drilling and oil production in the Mangistau Province in the southwestern region of Kazakhstan. Since the date of execution of the original exploration contract, we have successfully negotiated several amendments to the contract that have extended the term of our exploration contract to January 2013 and extended the territory of the contract area to approximately 850 square kilometers, which is comprised of the "ADE Block", the "Southeast Block" and the "Northwest Block".

Exploration Stage Activities

Under the statutory scheme in Kazakhstan, prospective oil fields are developed in two stages. The first stage is exploration stage. During this stage the primary focus is on the search for commercial discoveries, i.e., discoveries of sufficient quantities of oil and gas to make it commercially feasible to pursue execution of, or transition to, the second stage, which is a commercial production contract with the government.

Minimum Work Program Requirements

In order to be assured that adequate exploration activities are undertaken during exploration stage, the Ministry of Energy and Mineral Resources of the ROK ("MEMR") establishes an annual mandatory minimum work program to be accomplished in each year of the exploration contract. Under the minimum work program the contractor is required to invest a minimum dollar amount in exploration activities within the contract territory, which may include geophysical studies, construction of field infrastructure or drilling activities. During the exploration stage, the contractor is also required to drill sufficient wells in each field to establish the existence of commercially producible reserves in any field for which it seeks a commercial production license. Failure to complete the minimum annual work program requirements could preclude the contractor from receiving a longer-term production contract, could result in penalties and fines or even in the loss of the contractor's license.

The contract we hold follows the above format. Historically, our annual work program year ran from July 10 of each year to July 9 of the next year. In connection with a recent amendment to our contract, our work program year end was changed to January 9 of each year beginning in 2010. From the beginning of the

exploration stage of our contract through July 9, 2009, our minimum mandatory expenditure requirement totaled $50,525,000. During that time period, we expended $264,690,000 in exploration activities, including the drilling of 24 wells. Our minimum work program requirement for the current period, which runs from July 10, 2009 to January 9, 2010 is $8,565,000. Thereafter, our minimum annual expenditure requirements are: $21,520,000 from January 2010 to January 2011; $27,300,000 from January 2011 to January 2012; and $14,880,000 from January 2012 to January 2013.

Since 2004 we have been actively drilling wells in each field on the ADE Block and since 2005 we have been drilling in the Southwest Block in the Kariman field. Our drilling activities have consisted in drilling an array of exploratory wells to delineate reservoir structures and developmental wells intended to provide income to the Company. During fiscal 2009 we completed a very active three-year drilling program. During this time we drilled 17 wells to an average depth of 3,800 meters. Beginning in September of 2008 we began to phase out our new well drilling activities and we have released four large drilling rigs since that date as current drilling projects were completed.

Our strategy for the current fiscal year is to establish a sound financial basis to support our development of a long-term and profitable oil and gas exploration and production business. We intend to do this by focusing our attention during the fiscal year on the following objectives:

• Reduce current accounts payable;

• Conduct field operations focused on maximizing production and field delineation; and

• Commence investigation of the Northwest Block.

Drilling Operations, Well Performance and Production

As noted above, we have shifted our operational focus from growth through drilling to working closely with our existing wellstock to enhance production from existing wells. In particular, we have successfully tested and are actively implementing a strategy of installing centrifugal submersible pumps at the Kariman field. This strategy has resulted in stabilization of production rates from certain Kariman wells. We are in the process of researching various available options for increasing production from our other fields.

During the fiscal quarter ended June 30, 2009, our average daily crude oil production was 2,469 barrels per day. We expect our production to remain stable should our strategy of working with the centrifugal submersible pumps prove to be a long-lasting success. However, we do recognize that in order to significantly increase our production we will need to engage in additional exploration activities. Further exploration, including 3D seismic, re-opening of existing wells and drilling of new wells, will heavily depend on our ability to obtain additional funding. Given the unfavorable global economic outlook, the current status of the financial sector and our own current financial situation, it may be very difficult for us to obtain additional funding.

Results of Operations

Three months ended June 30, 2009, compared to the three months ended June 30, 2008.

Revenue and Production



The following table summarizes production volumes, average sales prices and
operating revenue for our oil and natural gas operations for the three months
ended June 30, 2009 and the three months ended June 30, 2008.



                                                                   Three months ended
                                                                     June 30, 2009
                                                               to the three months ended
                                                                     June 30, 2008
                               For the three    For the three       $               %
                                  months           months
                                   ended            ended        Increase        Increase
                               June 30, 2009    June 30, 2008   (Decrease)      (Decrease)

Production volumes:
Natural gas (Mcf)                          -                -              -             -
Natural gas liquids (Bbls)                 -                -              -             -
Oil and condensate (Bbls)            224,687          328,369      (103,682)         (32%)
Barrels of Oil equivalent
(BOE)                                224,687          328,369      (103,682)         (32%)

Sales volumes:
Natural gas (Mcf)                          -                -              -             -
Natural gas liquids (Bbls)                 -                -              -             -
Oil and condensate (Bbls)            222,550          327,757      (105,207)         (32%)
Barrels of Oil equivalent
(BOE)                                222,550          327,757      (105,207)         (32%)

Average Sales Price (1)
Natural gas ($ per Mcf)                    -                -              -             -
Natural gas liquids ($ per
Bbl)                                       -                -              -             -
Oil and condensate ($ per
Bbl)                                 $ 52.87         $ 106.26      $ (53.39)         (50%)
Barrels of Oil equivalent
($ per BOE)                          $ 52.87         $ 106.26      $ (53.39)         (50%)

Operating Revenue:
Natural gas                                -                -              -             -
Natural gas liquids                        -                -              -             -
Oil and condensate              $ 11,766,806     $ 34,827,224 $ (23,060,418)         (66%)
Gain on hedging and
derivatives (2)                            -                -              -             -

(1) At times, we may produce more barrels than we sell in a given period. The average sales price is calculated based on the average sales price per barrel sold, not per barrel produced.

(2) We did not engage in hedging transactions, including derivatives during the three months ended June 30, 2009, or the three months ended June 30, 2008.

Revenues. We generate revenue under our exploration contract from the sale of oil recovered during test production. As a result of decreases in reservoir pressure in some of our existing wells, during the three months ended June 30, 2009 our oil production decreased 32% compared to the three months ended June 30, 2008.

During the three months ended June 30, 2009 we realized revenue from oil sales of $11,766,806 compared to $34,827,224 during the three months ended June 30, 2008. The significant contributing factors to the 66% decrease in revenue were a 50% decrease in the price per barrel we received for oil sales and a 32% decrease in sales volume as a result of decreased production. During the three months ended June 30, 2009 and 2008 we exported 100% and 93% of our oil, respectively, to the world markets and realized the world market price for those sales. Revenue from oil sold to the world markets made up 100% and 99% of total revenue, respectively, during the three months ended June 30, 2009 and 2008. We anticipate production to remain fairly constant and currently anticipate revenues will be flat in upcoming quarters.

As discussed above, our revenue is sensitive to changes in prices received for our oil. Political instability, the economy, changes in legislation and taxation, reductions in the amount of oil we are allowed to export to the world markets, weather and other factors outside our control may also have an impact on both supply and demand and on revenue.

Costs and Operating Expenses



The following table presents details of our costs and expenses for the three
months ended June 30, 2009 and 2008:



                                  For the three months      For the three months
                                  ended June 30, 2009       ended June 30, 2008
Expenses:
Export duty                                         $ -               $ 1,352,917
Oil and gas operating(1)                      3,092,437                 2,340,843
General and administrative                    4,851,766                 4,337,641
Depletion(2)                                  2,243,304                 3,333,289
Interest expense                              1,148,047                         -
Accretion expenses                              107,847                    95,958
Amortization and depreciation                   130,973                    63,659
Consulting expenses                                   -                11,727,500
Total                                      $ 11,574,374              $ 23,251,807
Expenses ($ per BOE):
Oil and gas operating(1)                          13.90                      7.14
Depletion (2)                                     10.08                     10.17

(1) Includes transportation cost, production cost and ad valorem taxes.

(2) Represents depletion of oil and gas properties only.

Oil and Gas Operating Expenses. During the three months ended June 30, 2009 we incurred $3,092,437 in oil and gas operating expenses compared to $2,340,843 during the three months ended June 30, 2008. This significant increase is primarily the result of the new rent export tax we became subject to with the effectiveness of the new tax code in January 2009. These increases were partially offset by decreases in payroll and related payments and transportation expenses.

The mineral extraction tax replaced the royalty we were paying under the prior version of the tax code. The rate of this tax depends upon annual production output. The new code currently provides for a 5% mineral extraction tax rate (6% in 2010 and 7% starting from 2011) on production sold to the export market, and a 2.5% tax rate (3% in 2010 and 3.5% starting from 2011) on production sold to the domestic market. During the three months ended June 30, 2009 mineral extraction tax paid to the government amounted to $627,043. During the quarter ended June 30, 2008, royalty payments were $901,561.

Rent export tax is calculated based on the export sales price and ranges from as low as 0% if the export sales price is less than $40 per barrel to as high as 32% if the price per barrel exceeds $190. During the three months ended June 30, 2009 rent export tax paid to the government amounted to $1,533,437. We were not subject to the rent export tax during the three months ended June 30, 2008.

We calculate oil and gas operating expense per BOE based on the volume of oil actually sold rather than production volume because not all volume produced during the period is sold during the period. The related production costs are expensed only for the units sold, not produced.

During the three months ended June 30, 2009 payroll and related payments to production personnel decreased $37,780 or 19% compared to the three months ended June 30, 2008. This decrease is due to decreases in production personnel as we have decreased our exploration activities.

As a result of our decreased production, while oil and gas operating expenses increased 32% on a cumulative basis during the three months ended June 30, 2009, expense per BOE during the same period increased 95%. Expense per BOE is a function of total expense divided by the number of barrels of oil we sell. During the three months ended June 30, 2008 we sold 327,757 barrels of oil, during the three months ended June 30, 2009 we sold 222,550 barrels of oil. The 32% decrease in production coupled with the 32% increase in oil and gas operating expenses resulted in a $6.76, or $95%, increase in oil and gas operating expense per BOE.

General and Administrative Expenses. General and administrative expenses during the three months ended June 30, 2009 were $4,851,766 compared to $4,337,641 during the three months ended June 30, 2008. This represents a 12% increase. This increase in general and administrative expenses was the result of a 323% increase in non-cash compensation expense which was partially offset by decrease in:

• a 97% decrease in taxes resulting from environmental payments due to utilization of gas on Gas Utilization Facility;
• a 68% decrease in business trips and accommodation expenses;
• a 67% decrease in other taxes; and
• a 50% decrease in professional services resulting from decrease in legal fees incurred in our ongoing litigation.

During the three months ended June 30, 2009 we recognized non-cash compensation expense of $2,401,576 resulting from restricted stock grants previously made to employees. By comparison, during the three months ended June 30, 2008 we recognized non-cash compensation expense in the amount of $567,889 for restricted stock grants previously made to employees and outside consultants.

Depletion. Depletion expense for the three months ended June 30, 2009 decreased by $1,089,985 compared to the three months ended June 30, 2008. The major reason for this decrease in depletion expense was a 32% decrease in sales volume during the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

Amortization and Depreciation. Amortization and depreciation expense for the three months ended June 30, 2009 increased by a 106% compared to the three months ended June 30, 2008. The increase resulted from purchases of fixed assets during the quarter ended June 30, 2009.

Income from Operations. During the three months ended June 30, 2009 we realized income from operations of $192,432 compared to income from operations of $11,575,417 during the three months ended June 30, 2008. This decrease in income from operations during the three months ended June 30, 2009 is the result of the 66% decrease in revenue, which decrease was partially offset by a 50% decrease in total costs and operating expenses.

Other Income. During the three months ended June 30, 2009 we realized total other expense of $161,650 compared to total other income of $1,745,906 during the three months ended June 30, 2008. The change from other income to other expense between the respective quarters is largely attributable to $1,650,293 we received from a Company shareholder during the quarter ended June 30, 2008, as disgorgement of profits earned in violation of the short-swing profit rules of
Section 16b of the Securities Exchange Act of 1934 compared with a foreign exchange loss during the three months ended June 30, 2009 compared to a gain during the three months ended June 30, 2008.

Net Income. For the foregoing reasons, during the three months ended June 30, 2009 we realized net income of $30,782 or $0.00 per share compared to a net income of $13,321,323 or $0.30 per share for the three months ended June 30, 2008.

Liquidity and Capital Resources

For the period from inception on May 6, 2003 through June 30, 2009, we have incurred capital expenditures of $242,105,789 for exploration, development and acquisition activities. Funding for our activities has historically been provided by funds raised through the sale of our common stock and debt securities and revenue from oil sales. From inception to June 30, 2009 we raised approximately $94.6 million through the sale of our common stock. Additionally, during the quarter ended September 30, 2007 we completed the placement of $60 million in principal amount of 5.0% Convertible Senior Notes due in 2012. The net proceeds from the Note issuance of approximately $56.2 million were used to pursue our drilling program. For additional detail regarding the Notes, including adjustments to the initial conversion price and the registration right of the Noteholders, see Note 9 to the Notes to the Consolidated Financial Statements, June 30, 2009.

Problems in the credit markets, the significant declines in worldwide oil prices and volatility and downward trends in the stock markets have caused many junior exploration and production companies, including us, to seek additional capital in order to stay in business. Some companies have been acquired by larger companies and others have failed.

At June 30, 2009, our current liabilities exceeded current assets by $6,621,107. This continues to create liquidity problems for the Company in the near term. This gap in current liabilities over current assets arose from the steep decline in world oil prices, a drop in our current oil production and the export duty imposed by the government at a time when we were under contractual obligation to drill wells at four locations in the contract territory. In an effort to correct this situation we have ceased drilling new wells and we are working with creditors to establish payment schedules or other arrangements to reduce our current liabilities and continue operations. We have no assurance that we will be successful in negotiating favorable terms with our creditors.

Cash Flows



During the three months ended June 30, 2009 cash was primarily used to fund
exploration expenditures. See below for additional discussion and analysis of
cash flow.



                                          Three months ended  Three months ended
                                            June 30, 2009       June 30, 2008

Net cash provided by operating activities      $  5,608,169        $ 33,328,226
Net cash used in investing activities          $ (5,934,119)       $(27,102,805)
Net cash provided by financing activities        $         -        $          -

NET CHANGE IN CASH AND CASH EQUIVALENTS          $ (325,950)         $6,225,421

Our principal source of liquidity during the three months ended June 30, 2009 was cash and cash equivalents. At March 31, 2009 cash and cash equivalents totaled approximately $6.8 million. At June 30, 2009 cash and cash equivalents had decreased to approximately $6.4 million. During the three months ended June 30, 2009 we spent approximately $5.8 million to fund our drilling and development activities.

Certain operating cash flows are denominated in local currency and are translated into U.S. dollars at the exchange rate in effect at the time of the transaction. Because of the potential for civil unrest, war and asset expropriation, some or all of these matters, which impact operating cash flow, may affect our ability to meet our short-term cash needs.

Contractual Obligations and Contingencies



The following table lists our significant commitments at June 30, 2009,
excluding current liabilities as listed on our consolidated balance sheet:



                                           Payments Due By Period
Contractual                          Less than
obligations               Total        1 year     2-3 years    4-5 years   After 5 years
Capital Expenditure
Commitment(1)                                 $
                        $ 72,265,000 19,325,000  $ 45,500,000  $ 7,440,000           $ -
Due to the
Government of the
Republic of
Kazakhstan(2)             11,719,880     50,000       300,000   11,369,880             -
Liquidation Fund           4,371,841          -             -    4,371,841             -
Convertible Notes
with Interest(3)          74,823,785  3,000,000     6,000,000   65,823,785             -
Total                                         $

(1) Under the terms of our subsurface exploration contract we are required to spend a total of $72.7 million in exploration activities on our properties, including a minimum of $8.6 million by January 2010, $21.5 million by January 2011, $27.3 million by January 2012 and $14.9 million by January 2013. As of June 30, 2009, we have spent a total of $264.7 million in exploration activities.