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Results for January –June 2008 and Q2 show continuos improvements in operational performance

  • Strong operational performance and high crude prices lead to an almost doubled EBIT compared to 6m/2007
  • Modernization efforts; investments higher by 156% than the similar period of last year
  • Oil production in Romania stable, refining efficiency further improved
  • Total marketing volume sales higher by 19% compared to 6m/2007
  • Outlook for 2008: We expect to deliver further robust earnings, supported by new field developments in upstream and ongoing modernization

Mariana Gheorghe, CEO of Petrom: “In the first six months of 2008 we recorded positive results, which significantly improved comparing to the same period last year, due to improved operational efficiency and the high oil prices. We made higher investments of 156% compared to the same period in 2007, kept oil production at the stabilized level of last year, increased the refining efficiency and recorded a significant increase in oil products sales. Operational profit in Q2/08 was lower than in Q1/08 mainly due to lower gas production, higher depreciation and provisions.
Given the current global energy environment, marked by high energy prices and increasing demand, we will continue to focus on strong measures to maintain the level of hydrocarbon production, increase energy efficiency and develop the renewable energy, supported by considerable investment amounts. Our entry into the power business together with our renewable energy projects will enable us to make the transition, in the mid to long term, from an oil and gas company to an energy company.”

Q1/08 Q2/08



Key performance indicators(RON mn)




1.029 838 548 53% EBIT 1.867 942 98% 1.965
1.269 1.300 7.66 70% EBITDTA 2.570 1.389 85% 3.111
977 687 506 36% Net income 1.664 887 88% 1.778
3.719 4.555 2.677 70% Turnover 8.274 5.434 52% 12.284
2.047 1.338 771 74% Investments* 3.385 1.322 156% 3.820
31.115 34.120 29.667 15% Employees at the end of the period 34.120 29.667 15% 26.397

*Investments include increases of Petrom share participations

The Company’s turnover increased by 52% to RON 8,274 mn compared to 6m/07 mainly due to higher fuel sales (both domestic and export sales and both quantities and prices). The same positive selling price impact was recorded in the G&P segment.

Other operating revenues increased to RON 91 mn due to a higher level of sales of assets in marketing and E&P.

Operating expenses increased 40% compared to 6m/07, to RON 6,614 mn, mainly due to the increase in raw materials costs caused by higher crude oil prices and higher staff costs as well as the impact of the integration of the oil business service acquired from Petromservice as of February 2008. Litigation provisions for risks and charges and increased adjustments on the value of tangible and intangible assets related to higher investments had a significant effect on operating expenses.

EBIT amounted to RON 1,867 mn, 98% above the RON 942 mn result in 6m/07 with positive contributions from both E&P and R&M.


The total investments in 6m/08 were 156% higher than in 6m/07, amounting to RON 3.385 mn.

Q1/08 Q2/08 Q2/07 ∆Q2 in RON mn 6m/08 6m/07 % 2007
1.765 876 476 84% Exploration & Production 2.641 879 200% 2.465
198 238 235 1% Refining & Marketing 436 330 32% 1.004
38 179 2 - Gas & Power 217 3 - 32
46 46 54 -15% Corporate & others (inclouding Petrom Solutions) 92 105 -12% 303
2.047 1.339 771 74% Total investments 3.386 1.322 156% 3.820

*From Q1/08, Chemicals (Doljchim) is no longer reported separately but under Gas & Power division

Exploration and Production (E&P)

  • Strong results due to higher international oil prices 
  • Investments in 6m/08 higher with 200% than in 6m/07 
  • Efforts to maintain the crude production successfully continue; however, Q2/08 gas production volumes are lower due to limitations in gas distribution network  
  • Well modernization program ahead of schedule with 3,537 wells completed until end of June 2008

EBIT increased by 57%, from RON 1,328 mn to RON 2,086 mn, mainly driven by the ongoing favorable crude price development. This positive impact was partly offset by the contribution to the social fund based on the protocol signed in March 2008 by Petrom with the Ministry of Economy and Finance. In this protocol it was agreed that Petrom will contribute voluntarily to the Gas Social Fund. The contribution was established at RON 80 mn, payable in 11 equal monthly instalments of RON 7.27 mn. By the end of June, this contribution amounted to RON 36 mn and was fully funded by E&P.

E&P investments in Romania increased by 200% in 6m/08 compared to 6m/07 mainly due to the acquisition of the oil services business of Petromservice, but also due to increased drilling activity and well modernizations.

In 6m/08 the domestic realized crude price rose by 75% to USD 95.23/bbl compared to 6m/07 due to higher international prices. However, the domestic realized crude price increased by only 68% in RON terms over the same period last year, due to the strengthening of the RON against the USD. 

Domestic production costs of USD 17.89/boe were 12% higher compared to 6m/07, mainly driven by the strengthening of the RON against the USD by 5%, industry cost inflation and higher service related costs. Expressed in RON/boe, domestic production costs increased by 7% compared to 6m/07.

Petrom SA had exploration costs in 6m/08 amounting to RON 162.2 mn which included RON 38.6 mn costs related to wells foe which the drilling started in prior years. In addition, Petrom S.A. had exploration capitalized in 6m/08 amounting to RON 49.5 mn.

Compared to 6m/07, group oil and gas production decreased by 1% to 35.71 mn boe as a consequence of the domestic gas production decrease. Group oil production was up by 1% compared to 6m/07, reaching 17.07 mn boe, due to the increase of oil production in Kazakhstan.

Total oil and gas production of Petrom S.A. in Romania amounted to 34.75 mn boe in 6m/08 (1% lower than in 6m/07).

In 6m/08 the crude oil production of Petrom S.A.  in Romania amounted to 2.26 mn tons, equal to 6m/07. Stabilization of oil production was achieved through improved drilling performance, modernization of wells, and the application of new technologies.

Natural gas production of Petrom S.A. reached 2,823 mn cbm, 3% lower than in 6m/07, due to poor conditions of the transport network that hampered the access to the system, electricity supply interruptions and unexpected temporary shutdowns at some major clients in the fertilizer industry.

Tunaround program

The well modernization program has continued succesfully. For the first six months of this year a total number of 1,425 wells have been modernized. Overall, the project is ahead of schedule: 3,537 wells have been modernized since the start of the program in 2007. By the end of 2008 a total of approximately 5,000 wells will be modernized with a positive impact on both production savings and the increase of production.

Drilling activity speeded up during 6m/08 leading to a total number of 121 development wells being drilled.

The Field Redevelopment Plans  are progressing and the development of Mamu gas field has been already initiated.

Exploration and Production Services (EPS)

The acquisition and integration of the acquired oil services business of Petromservice into Petrom supports two strategic objectives of the E&P division: the stabilization of the oil and gas production and the reduction of production costs. For the integration of the newly acquired oil services, a new division was created within Petrom: Exploration and Production Services (EPS), effective February 2008. EPS results are consolidated within the E&P segment.

The integration of oil services progresses in line with our planning. The first phase - the stabilization phase –was successfully concluded.
During the second the focus is on the consolidation of  the operational business and performing projects in order to realize the turnaround.

The workover & drilling, maintenance and logistics functions have been strengthened by implementing modern methods of management and optimizing the existing equipment..
For the second half of 2008 the main steps will be the implementation of efficiency measures and the start of the reorganization of on-site service.

The Turnaround of EPS will start after the analysis phase currently going on. The turnaround program should be finished by 2010.

Through these measures production costs should be reduced by USD 1.5 per barrel.

International E&P activities

Oil and gas production in Kazakhstan amounted to 509 thousand boe, 13% higher than in Q1/08 and 31% higher than in Q2/07. Several wells were put in function whilst an increase of production quantity was achieved after fracturing operations at already functioning wells.

The Komsomolskoe field development continues, with first oil production expected in Q4/08.

In Russia, one of the three exploration wells reached its original planned depth but will be deepened further. The drilling of the other two is behind schedule and will reach its target in Q3/08 and Q4/08, respectively. Seismic acquisition is on schedule and results are expected by early 2009. The work program for 2009 is being prepared.

Two license extensions were granted in the Saratov Region. Extensions are being sought for more licenses that are scheduled to expire in late 2008.

Refining and Marketing (R&M)

  • Improved result based on continued efficiency gains and rising inventory valuations, despite the deteriorating margin environment
  • Throughput per filling station is continuously improving due to the implementation to the full agency system and higher domestic demand
  • 19% total marketing sales increase compared to same period of 2007, despite higher fuel prices

EBIT at the R&M business improved significantly compared to 6m/07, from RON –465 mn to RON -192 mn, despite the deteriorating margin environment, driven by the positive inventory effects in refining, a more profitable product yield and improvements in the marketing business: higher deliveries to both domestic and foreign markets, purchase process optimization and reduced costs.

R&M investments increased by 32% compared to 6m/07, driven by Refining investments in the FCC (fluid catalytic cracking) post-treater project in Petrobrazi and further projects within the modernisation program.

Marketing investments decreased by 23% in 6m/08 compared to 6m/07.  The main decrease came in retail (-54%) due to a lower number of filling stations reconstructed and modernized compared to the same period of 2007. In 6m/07, 12 filling stations were reconstructed and modernized and 4 new ones built, while in 6m/08, 11 filling stations were reconstructed and modernized.

The total quantity of crude processed in 6m/08 amounted to 2,964 thousand tons, higher by 3% compared to 6m/07, of which 27% represented imported crude oil.

The refinery utilization rate was 75%, 4% higher than in 6m/07.

Due to higher oil prices, the indicator refining margin dropped to a very low level of only USD 0.9/bbl, which was 4.55 USD/bbl lower than in 6m/07.

Petrochemical and special product sales are 3.3% higher than the 6m/07 level.

In today's environment within Petrom's refinery segment the Arpechim refinery cannot generate the required rate of return due to the high own energy consumption, unfavourable product yields and high fixed costs. Therefore, the investment focus will be to ensure HSE compliance and several options are under discussion to reorganize the operations at Arpechim. In the course of the planning process which is expected to last for the next months these options will be evaluated. After finalizing this planning process the resulting impacts, including potential partial impairments, will be re-assessed.

Total marketing sales increased by 19% in comparison with 6m/07 to 2,457 thousand tons.

White product sales on the domestic market were 13% above the 6m/07 level, driven by higher demand, the upgrade of the filling station network and also the improved retail station management. Domestic gasoline sales were up by 4% compared to 6m/07, while domestic diesel sales increased by 19% compared to the same period of 2007. Aviation fuel sales increased significantly compared to 6m/07 with 32%.

Retail sales increased in comparison with 6m/07 by 24% to 848 mn liters, while commercial domestic sales amounted to 929 thousand tons, 2% lower than in 6m/07, due to lower demand for fuel oils in the domestic market.

Exported quantities were 47% higher in 6m/08 compared to 6m/07, mainly due to exporting heavy fuel oil, which could not be sold locally.

The average throughput per filling station is continuously improving, due to higher demand and as a result of the implementation of the full agency system.

The non-oil business also registered a significant increase. The total turnover increased to RON 114 mn, 51% higher compared to Q2/07, due to portfolio and purchase process optimization.

At the end of June 08, Petrom SA had 450 filling stations, while under Petrom Group operated in total 805 filling stations: 547 in Romania and 258 in Republic of Moldova, Bulgaria and Serbia.

Gas and Power (G&P)

  • Lower results in the marketing and trading business compared to 6m/07
  • Maintenance shutdown at Doljchim burdened sales volumes and result
  • Main contracts for the combined cycle power plant Brazi  signed

EBIT generated by the G&P business of Petrom SA was significantly lower compared to Gas EBIT in 6m/07, mainly because of the negative contribution of Doljchim in Q2/08 and a lower result of gas supply, marketing and trading. In gas supply, marketing and trading, results were further affected by the regulatory environment, increasing import prices and the non repetition of the positive effect of high demand from the power sector, which prevailed last year.

The investments in Doljchim amounted to RON 36 mn while Power related investments stood at RON 180.7 mn.

The gas sales of Petrom SA decreased by 4% from 2,595 mn cm in 6m/07 to 2,580 mn cm in 6m/08.

While the Romanian Natural Gas regulator considered for the regulated basket price an unchanged import gas price of USD 370/1,000 cbm as in Q1/08, the actual price of imported gas increased to USD 392/1,000 cbm in 6m/08 compared with USD 288/1,000 cbm in 6m/07. The average regulated gas price for Romanian producers was USD 204.49/1,000 cbm (RON 490.83/1,000 cbm), up by 20% compared to 6m/07 (15% in RON terms). The regulated end-user gas price for households and industrial customers in Romania increased by 8.5%, as of February 1, 2008. However, the gas price increase in February 2008 did not impact the result of G&P since, in accordance with the agreement with the Romanian government in March 2008, Petrom contributed RON 36 mn in 6m/08 to the newly established Social Gas Fund. The Social Fund was set up to make grants to alleviate the burden of gas price increases on low income Romanians households who rely on gas for domestic heating.

EBIT recorded by Doljchim in 6m/08 was negative (RON -44 mn ).

The volume of Doljchim sales decreased by 22% to 275 thousand tons. The decrease was mainly due to the major maintenance shutdowns undertaken at the fertilizer plants and ammonia plant in January and February and the methanol plant in May to June.

Export sales represented around 40% of total sales.

Status of Brazi power plant construction

The construction of Brazi power plant is advancing according to schedule and within the budget approved last year. In the second quarter of 2008 the Power division made further steps in advancing the project and important milestones were reached:

Conclusion of the site preparation works (underground demolition and rerouting);

The site was handed over to the Consortium in order to prepare the construction area.

The following contracts were signed in 6m/08:

  • Long Term Service Agreement (LTSA) for CCCP Brazi with General Electric International Inc.
  • High voltage connection lump sum turn key contract  with Siemens for the evacuation of the energy generated by CCPP Brazi 
  • Contract with Itochu-Toshiba (Japan) for Brazi Vest substation extension

The Owner Enegineering services contract (OE) for CCPP Brazi with ESBI Engineering (Ireland) and Facilities Management Ltd. Is in the final stage and closing is scheduled for Q3/08.