- Financial results (Turnover, EBIT, EBITDA, Net income) above the budgeted figures
- Investments in 2007 stepped up by 30% reflecting the company’s modernization and growth
- EBIT down by 29% due to lower oil production and to the RON appreciation
- Stabilization of oil production in Romania in the second quarter and several discoveries recorded
- Improvements in product yield and own energy consumption and loss were achieved in Refining
- In Marketing the restructuring is now almost completed
Mariana Gheorghe, CEO of Petrom: “The results are in line with our expectations, despite the mixed impact of the volatile macroeconomic environment, increasing international oil prices and supply costs. We managed to stop the production decline and we continued to improve operational efficiency, based on the restructuring programs and investments in all the business segments. One of the major achievements was the implementation of SAP and establishment of a group-wide service centre for finance and IT. The company is still in the midst of a significant investment program which will continue until 2011. These investments will be the basis for significant earnings improvement. The high volatility of the economic environment is expected to continue throughout 2008, but we do not foresee a major impact on our business, as the demand for oil products in Romania continues to grow and the company successfully continues its modernization efforts.”
|Key performance indicators||Year||on||year||Quarter||on||Quarter|
|(RON mn)||2007||2006||Change in %||T4/07||T4/06||Change in %|
|Employees at the end of the period||26.397||
Investments include increases in Petrom share participations
The company's turnover for 2007 decreased by 6% yoy mainly due to lower R&M exports sales quantities and prices. This was partly compensated by the higher turnover generated by the Gas business.
The operating expenses decreased in 2007 by 1% being mainly influenced by the decrease of raw materials expenses due to lower crude import quantities, lower expenses with utilities (as a result of the renegotiation of the contracts), reduced provisions (due to improved credit risk management) and lower staff-cost mainly due to the lower number of employees as a result of the restructuring program. The positive effect on operating expenses has been offset by higher expenses for third party related services and higher depreciation of the tangible and intangible assets.
1 - The financials are unaudited and prepared according to RAS; all the figures refer to Petrom SA unless otherwise stated
The EBIT of the company amounted to RON 1,965 mn in 2007, 29% below the RON 2,777 mn result recorded in 2006.
This was mainly due to the weaker EBIT generated by the Exploration and Production as a result of the production decline, higher stocks of oil products in other segments than E&P and negative impact of the RON appreciation by 13% against USD. The other business divisions recorded improved EBIT.
Corporate tax charge increased in 2007 by RON 111 mn, due to the termination of the geological quota facility with effect from 2007.
The net profit decreased in 2007 by 22% in comparison with 2006 as a consequence of the weaker operational result and higher corporate taxes.
Total taxes payables by Petrom in 2007 amounted to RON 5,679 mn higher by 8,8 % as compared to 2006.
The excise duties (RON 2,903 mn), VAT (972 mn RON) and royalties (RON 524 mn) accounted for 77% of the total taxes payable.
|2007||2006||Change in %||T4/07||T4/06||Change in %|
Exploration and production
Refining and marketing
Corporate (incl. Petrom Solutions)
The total capital expenditure realised in 2007 amounted to RON 3,820 mn, higher by 30% as compared to 2006.
In 2007 the main share of investments went to E&P, which accounted for 65% of the company's investments, while those in R&M accounted for 26% share of the investments. The rest of 9% represented investments in Corporate (mainly Petrom Solutions), Gas and Chemicals.
E&P investments in Romania in 2007 increased by 85% as compared to 2006, mainly related to the development and production drilling and to the wells modernization program.
Investments projects in Refining business progressed during 2007, with the new hydrogen plant commissioned at Arpechim and with mechanical completion of a new high efficiency, high pressure steam boiler. At Petrobrazi, we have commissioned the new diesel hydrotreater (HDS) unit and started construction of the new FCC gasoline hydrotreater unit scheduled for start up in early 2009. These two investments enable production of Euro 5 fuels at the site.
In Marketing, the investments were directed mainly to reconstructing and modernizing the existing filling stations, but also to green-field constructions and to the Supply & Logistic projects. The yoy 23% lower investments figure in 2007 of the R&M business is explained by the extraordinarily high capital expenditures recorded last year due to the acquisition of the OMV retail networks in Romania, Serbia and Bulgaria.
In 2007 the investments in Doljchim amounted to RON 16 mn, up by 191% as compared to 2006 and were related mainly to environmental protection, health and safety, infrastructure and fire prevention.
Exploration and Production
- Investments in 2007 were significantly higher over 2006 by 85%
- Production decline arrested and company domestic reserve replacement rate above plan at 38%
- Successful exploration activity
The EBIT of the Exploration and Production business of Petrom SA decreased by 24% for 2007 over 2006, mainly due to the production decline and industry cost inflation.
Total oil and gas production in Romania amounted to 70.27 mn boe in 2007, by 4% lower than 2006, due to natural decline and external factors. Domestic oil production was affected by the natural decline and the shutdowns needed for the modernisation program. The overall gas production was negatively impacted by the temporary shutdowns of some major customers, network limitation and by reduced demand due to the mild winter in Q1/07.
In Kazakhstan the average production from existing fields increased in 2007 by 6% to 4,621 boe/day (2006:4,350 boe/day) despite the sale of the Sinelnikovskoe field.
Exploration activity was successful, with several new discoveries reported during the year. The most important of them are Delta 4 - the first offshore discovery in the last 8 years - and Torcesti.
Petrom SA spent RON 335 mn on exploration activity in 2007, of which RON 230 mn was expensed and RON 105 mn was capitalised.
The domestic realized crude price in USD increased by 13% in 2007 compared to 2006, reaching USD 63/bbl, mainly due to higher international oil prices. Nevertheless, when expressed in RON, the domestic realised crude price in 2007 actually decrease by 2% over 2006, under the influence of the strengthening of the RON during the first three quarters of 2007 against the USD.
The domestic production cost of USD 16.83/boe was 23% higher compared to 2006, mainly driven by the strengthening of the RON against the USD by 13%, lower production levels and higher salaries and service related costs. The domestic production cost expressed in RON/boe increased by only 6%, a clear indication of the significant impact of RON appreciation against the USD.
Refining and Marketing
- Restructuring efforts in refining business led to positive effects in 2007
- Full Agency Program successfully completed in 2007
- Yearly throughput per filling station improved considerably in 2007: 3.2 mn liters per year, compared to 2.4 mn liters in 2006
- 100 premium PETROMV filling stations at the end of 2007
The EBIT of R&M business improved compared to the previous year particularly due to the better contribution from Refining as a result of the better product yield (with higher share of diesel), the progress in reducing the own-energy consumption and positive inventory effects.
The 2007 results were adversely impacted by the deteriorating margin environment, on account of rising feedstock and energy costs and lagging product prices.
During 2007, Petrom's refineries processed a volume of crude oil of 5.92 mn tons, 14% lower than in 2006. Within this total, the imported crude volume processed by the two refineries decreased by 27% in 2007 to 1.6 tons, in comparison with 2006.
The overall refining utilization rate decreased to 74.5% from 86% in the last year. The lower utilization was caused by the shutdown of the two refineries. However, the overall impact of these shutdowns on R&M results was low considering the weak margins.
In 2007 Petrom commenced to blend biodiesel with diesel and began the selling of diesel with 2% biodiesel content as of July 1, 2007, in line with the existing regulations.
We completed the restructuring of the maintenance services company Rafiserv and all maintenance services for Petrom refineries are now provided by international frame contractors at competitive rates compared to Western European level.
Total marketing sales in 2007 amounted to 4,707 thousand tons, lower by 14% yoy, mainly due to the 34% reduction of export sales (which tend to have lower margins), as a result of the company's decision to optimize the refining product mix.
White product sales on the domestic market were 13% above last year's level, driven by higher demand, the upgrade of the filling station network and improved retail station management. Domestic gasoline sales are up by 5% yoy, while domestic diesel sales increased by 18% compared to 2006.
Retail sales reached 1,533 mn liters, by 22% higher compared to 2006.
As a result of the implementation of the Full Agency system, the yearly throughput per filling station improved considerably in 2007 reaching 3.2 mn liters per year, compared to 2.4 mn liters in 2006, higher than our 2010 target of 3 mn liters.
Commercial domestic sales of 2 mn tons were lower by 10% against the level recorded in 2006, due to lower Heavy Fuel Oil sales.
The non-oil business also registered a significant increase. The total turnover increased to 318 mn RON, 74% higher compared to last year's level due to portfolio reorganization and purchase process optimization.
Petrom Group operates 807 filling stations out of which 257 filling stations in Republic of Moldova, Bulgaria and Serbia.
At the end of 2007 Petrom held 550 fillings stations in Romania, out of which 450 were held by PetromSA. The number of premium PETROMV stations stood at 100 at the end of 2007.
In 2007, we successfully outsourced the secondary logistics and closed 111 out of 146 storage facilities and we started the construction works for one new terminal.
- The Gas Division was reorganized by establishing an affiliate gas distribution company, PDG
- Approval to build a gas fired power plant with a capacity of 860 MW
The EBIT generated by the Gas division of Petrom SA in 2007 amounted to RON 123 mn, slightly higher in comparison to 2006 and mostly due to larger sales volume.
The gas sales of Petrom SA increased by 6% compared to 2006 due to our flexibility in meeting short-term demand surges from power plants. This was achieved despite the fact that the total natural gas consumption of Romania in 2007 dropped by 5.5% (reduced by 900 mn cm) compared to 2006.
Petrom injected a total volume of 299 mn cm of natural gas in 2007 into storage, compared to 540 mn cm in 2006. This was due to higher quantities being sold on the market instead of being injected in the storages.
In 2007 the EBIT increased to RON 59 mn, up by 16% as compared to 2006, on the account of higher sales volume
The sales volume generated by Doljchim in 2007 increased by 14%, to 688 thousand tons, out of which export sales represented approximately 54%.
In 2007, Doljchim concentrated its efforts on increasing domestic market sales, especially fertilizers. Consequently, Doljchim achieved in 2007 record production levels of fertilizers stimulated by higher sales on the domestic market.