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 and starting from July 10, 2009 to September 30, 2009 we expended $9,124,000. 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.

We began drilling in the fields of the ADE block in 2004. 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 September 30, 2009, our average daily crude oil production was 2,827 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 September 30, 2009, compared to the three months ended September 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 September 30, 2009 and the three months ended September 30, 2008.



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

Production volumes:
Natural gas (Mcf)                          -                      -             -              -
Natural gas liquids (Bbls)                 -                      -             -              -
Oil and condensate (Bbls)            260,123                310,999       (50,876)         (16%)
Barrels of Oil equivalent
(BOE)                                260,123                310,999       (50,876)         (16%)

Sales volumes:
Natural gas (Mcf)                          -                      -             -              -
Natural gas liquids (Bbls)                 -                      -             -              -
Oil and condensate (Bbls)            282,889                309,521       (26,632)          (9%)
Barrels of Oil equivalent
(BOE)                                282,889                309,521       (26,632)          (9%)

Average Sales Price (1)
Natural gas ($ per Mcf)                    -                      -             -              -
Natural gas liquids ($ per
Bbl)                                       -                      -             -              -
Oil and condensate ($ per
Bbl)                            $      56.82             $    73.53  $     (16.71)         (23%)
Barrels of Oil
equivalent ($ per BOE)          $      56.82             $    73.53 $      (16.71)         (23%)

Operating Revenue:
Natural gas                                -                      -             -              -
Natural gas liquids                        -                      -             -              -
Oil and condensate              $ 16,074,217           $ 22,758,160  $ (6,683,943)         (29%)
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 September 30, 2009, or the three months ended September 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 September 30, 2009 our oil production decreased 16% compared to the three months ended September 30, 2008.

During the three months ended September 30, 2009 we realized revenue from oil sales of $16,074,217 compared to $22,758,160 during the three months ended September 30, 2008. The significant contributing factors to the 29% decrease in revenue were a 23% decrease in the price per barrel we received for oil sales because of decreased world oil prices and increased sales to the local market coupled with a 9% decrease in sales volume as a result of decreased production. During the three months ended September 30, 2009 and 2008 we exported 81% and 98% 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 97% and 99% of total revenue, respectively, during the three months ended September 30, 2009 and 2008. We anticipate production to remain fairly constant and currently anticipate revenues will be flat quarter-on-quarter in upcoming quarters and will continue to be lower compared to the comparable prior year quarter.

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 September 30, 2009 and 2008:



                                  For the three months      For the three months
                                  ended September 30,       ended September 30,
                                          2009                      2008
Expenses:
Export duty                               $           -            $   4,386,983
Oil and gas operating(1)                      4,807,760                2,274,862
General and administrative                    2,952,173                6,247,879
Depletion(2)                                  2,869,424                3,085,836
Interest expense                              1,145,331                        -
Accretion expenses                              110,878                  108,398
Amortization and depreciation                   161,840                   83,081
Consulting expenses                                   -               (3,065,000)
Total                                      $ 12,047,406             $ 13,122,039
Expenses ($ per BOE):
Oil and gas operating(1)                          17.00                     7.35
Depletion (2)                                     10.14                     9.97

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

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

Export Duty. On April 18, 2008 the government of the Republic of Kazakhstan introduced an export duty on several products (including crude oil). We became subject to the duty in June 2008. The formula for determining the amount of the crude oil export duty was based on a sliding scale that was tied to the world market price for oil. The amount of the export duty changed with fluctuations in world oil prices. In December 2008 the government of the Republic of Kazakhstan repealed the export duty effective January 26, 2009. We are now subject to the new tax code that went into effect on January 1, 2009, as discussed in more detail below. As a result of the export duty being repealed, we paid no export duty during the three months ended September 30, 2009 compared to $4,386,983 during three months ended September 30, 2008. Export duty was not recorded as part of oil and gas operating expense and was not included in oil and gas operating expense per BOE calculation.

Oil and Gas Operating Expenses. During the three months ended September 30, 2009 we incurred $4,807,760 in oil and gas operating expenses compared to $2,274,862 during the three months ended September 30, 2008. This increase is primarily the result of a 387% increase in payments to the government in the form of taxes and a 152% increase in production expense for the three months period ended September 30, 2009 compared to the three months ended September 30, 2008, and was partially offset by 39% decrease in transportation expense for the same period.

Oil and Gas Operating Expenses for the three months ended September 30, 2009 and 2008 consist of the following expenses:

                                    For the three months ended September 30,
                                         2009                      2008
                                   Total       Per BOE       Total       Per BOE
Oil and Gas Operating Expenses:
Production                      $    615,148   $   2.17   $    243,822   $  0.79
Transportation                       814,672       2.88      1,336,909      4.32
Royalty                                    -          -        694,131      2.24
Rent export tax                    2,446,476       8.65              -         -
Mineral extraction tax               931,464       3.30              -         -
Total                            $ 4,807,760    $ 17.00    $ 2,274,862    $ 7.35

The 152% increase in production expense during the three months ended September 30, 2009 compared to the quarter ended September 30, 2008 is due to purchase of light crude oil for blending purposes from a third party in amount of $465,832 during the three months ended September 30, 2009, and was partially offset by $94,506 or 39% decrease in payroll and related payments to production personnel during the three months ended September 30, 2009 compared to three months ended September 30, 2008. The decrease in payroll and related payments to production personnel is due to decreased production personnel as we have decreased our exploration activities.

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 September 30, 2009 mineral extraction tax paid to the government amounted to $931,464. During the quarter ended September 30, 2008, royalty payments were $694,131.

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 September 30, 2009 rent export tax paid to the government amounted to $2,446,476. We were not subject to the rent export tax during the three months ended September 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.

As a result of our decreased production, while oil and gas operating expenses increased by 111% on a cumulative basis during the three months ended September 30, 2009, expense per BOE during the same period increased by 131%. Expense per BOE is a function of total expense divided by the number of barrels of oil we sell. During the three months ended September 30, 2008 we sold 309,521 barrels of oil, during the three months ended September 30, 2009 we sold 282,889 barrels of oil. The 16% decrease in production coupled with the 111% increase in oil and gas operating expenses resulted in a $9.65, or 131%, increase in oil and gas operating expense per BOE.

General and Administrative Expenses. General and administrative expenses during the three months ended September 30, 2009 were $2,952,173 compared to $6,247,879 during the three months ended September 30, 2008. This represents a 53% decrease. This decrease in general and administrative expenses was the result of an 84% decrease in non-cash compensation expense which was coupled with:

• a 56% decrease in other taxes;
• a 54% decrease in professional services resulting from decrease in legal fees incurred in our ongoing litigation;
• a 52% decrease in business trips and accommodation expenses;
• a 49% decrease in rent expenses;
• a 29% decrease in payroll expenses; and
• a 1% increase in environmental payments for flaring of unused natural gas resulting from production. The amount of environmental payments totaled $148,969 and $147,020 during the three months ended September 30, 2009 and 2008, respectively.

Depletion. Depletion expense for the three months ended September 30, 2009 decreased by $216,412 compared to the three months ended September 30, 2008. The major reason for this decrease in depletion expense was a 9% decrease in sales volume during the three months ended September 30, 2009 compared to the three months ended September 30, 2008.

Amortization and Depreciation. Amortization and depreciation expense for the three months ended September 30, 2009 increased by a 95% compared to the three months ended September 30, 2008. The increase resulted from purchases of fixed assets.

Income from Operations. During the three months ended September 30, 2009 we realized income from operations of $4,026,811 compared to income from operations of $9,636,121 during the three months ended September 30, 2008. This decrease in income from operations during the three months ended September 30, 2009 is the result of the 29% decrease in revenue, which decrease was partially offset by an 8% decrease in total costs and operating expenses.

Other Income.During the three months ended September 30, 2009 we realized total other income of $13,198 compared to total other income of $193,905 during the three months ended September 30, 2008. The 93% decrease other income between the respective quarters is largely attributable to $176,899 interest income we received during the quarter ended September 30, 2008.

Net Income.For the foregoing reasons, during the three months ended September 30, 2009 we realized net income of $4,040,009 or $0.08 per share compared to net income of $9,830,026 or $0.21 per share for the three months ended September 30, 2008.

Results of Operations

Six months ended September 30, 2009, compared to the six months ended September 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 six months
ended September 30, 2009 and the six months ended September 30, 2008.



                                                                           Six months ended
                                                                          September 30, 2009
                                                                       to the six months ended
                                                                          September 30, 2008
                               For the six           For the six           $               %
                               months ended          months ended       Increase        Increase
                            September 30, 2009    September 30, 2008   (Decrease)      (Decrease)

Production volumes:
Natural gas (Mcf)                            -                     -             -              -
Natural gas liquids (Bbls)                   -                     -             -              -
Oil and condensate (Bbls)              484,810               639,367      (154,557)         (24%)
Barrels of Oil equivalent
(BOE)                                  484,810               639,367      (154,557)         (24%)

Sales volumes:
Natural gas (Mcf)                            -                     -             -              -
Natural gas liquids (Bbls)                   -                     -             -              -
Oil and condensate (Bbls)              505,439               637,278      (131,839)         (21%)
Barrels of Oil equivalent
(BOE)                                  505,439               637,278      (131,839)         (21%)

Average Sales Price (1)
Natural gas ($ per Mcf)                      -                     -             -              -
Natural gas liquids ($ per
Bbl)                                         -                     -             -              -
Oil and condensate ($ per
Bbl)                               $     55.08           $     90.36  $     (35.28)         (39%)
Barrels of Oil equivalent
($ per BOE)                        $     55.08           $     90.36  $     (35.28)         (39%)

Operating Revenue:
Natural gas                                  -                     -             -              -
Natural gas liquids                          -                     -             -              -
Oil and condensate                $ 27,841,023          $ 57,585,384 $ (29,744,361)         (52%)
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 six months ended September 30, 2009, or the six months ended September 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 six months ended September 30, 2009 our oil production decreased 24% compared to the six months ended September 30, 2008.

. . .