- 9m/09 results reflect lower oil prices on a year-on-year comparison; EBIT was significantly lower compared to 9m/08, while net profit was supported by the positive hedging result
- Oil and gas production was 5% lower compared to 9m/08, however oil production reversed its downward trend from Q2/09 as a result of production start ups; gas production was affected by limitations in the gas transmission system due to lower industrial demand
- Total marketing sales 9m/09 relatively stable: retail sales volumes rose 19% over 9m/08, in spite of adverse economical conditions, while the domestic commercial sales excl. HFO decreased by 11% and export sales lower by 26%
- We continued investments, although at lower level; contribution to the State budget remains stable compared to 9m/08
- Outlook for 2009: we expect the market environment to remain challenging with persisting volatility of our key business drivers (crude price, FX, refining margins); we will continue to focus on securing cash flow, further improving our costs position and strenghtening the company's potential as an integrated energy player
Mariana Gheorghe, CEO of Petrom: „Despite challenging economic conditions, we recorded good overall performance in the first nine months and the third quarter 2009, as results were supported by the effects of our timely response to the deteriorating environment: crude oil hedges for 2009, adjustment of our cost base and operations and the financing secured for our key projects. We have started production at the recently drilled offshore wells Delta 6 and Lebada Vest 4, which has helped reverse the downward trend in production. We also reduced the production costs and further strengthened our position in the retail fuels market. However, our cumulative results for the first nine months were affected by lower crude price, difficult economic conditions and deteriorating margins, marked by the downturn in the commercial and industrial sectors. In the near-term, we expect the oil and energy sector and the Romanian macroeconomic environment to be marked by volatility. In response to the current challenging environment, we will stay focused on our strategic directions and continuos investments, although at lower level, while further reviewing our restructuring options and assessing our business oportunities.”
|Q2/09||Q3/09||Q3/08||∆%||Key performance indicators (RON mn)||9m/09||9m/08||∆%||2008|
|29,103||28,215||33,656||(16)||Employees at the end of the period||28,215||33,656||(16)||33,311|
*Investments include increases of Petrom share participations in other companies
The Company's net turnover in 9m/09 declined by 27% to RON 9,456 mn compared to 9m/08 mainly due to lower price levels.
Operating expenses decreased by 22% compared to 9m/08, to RON 8,544 mn, mainly due to lower quantities and prices for imported crude oil as well as due to the fact that operating expenses for 9m/08 were burdened by the impairment booked for Arpechim and provisions for litigations.
EBIT amounted to RON 1,160 mn, 54% below the RON 2,509 mn result in 9m/08, primarily as a result of the unfavorable price environment.
The Company's financial result improved in 9m/09 to RON 586 mn from RON 337 mn in 9m/08, mainly attributable to the positive impact of oil price hedging that generated a financial gain of RON 465 mn and higher dividends received from subsidiaries, reduced by a negative foreign exchange result.
Net profit decreased by only 33% in 9m/09 compared to 9m/08 mainly due to the positive impact of the financial result.
As a result of its business activities, Petrom contributed RON 4,959 mn to the State budget, at almost the same level as in 9m/08. Income tax stood at RON 207 mn, royalties amounted to RON 399 mn and social contributions reached RON 465 mn. Petrom's contribution to the State budget via indirect taxes was mainly represented by excise (RON 2,813 mn), VAT (RON 438 mn) and also employee related taxes ( RON 496 mn).
The investments for Petrom SA in the first nine months of 2009 amounted to RON 2,713 mn, a 42% decrease compared to the same period in 2008.
in RON mn
|556||514||893||(42)||Exploration & Production||1,742||3,534||(51)||4,524|
|100||66||250||(74)||Refing & Marketing||403||686||(41)||1,297|
|94||28||80||(65)||Gas & Power||284||297||(4)||386|
|116||67||29||131||Corporate & others (Co & O)||285||121||135||197|
Exploration and Production (E&P)
- Significant results of the E&P activity following high investments: production started on two recently drilled offshore wells in the Black Sea (Delta 6, Lebada Vest 4), gas processing plant put in function at Midia
- 9m/09 results were burdened by the lower oil price, compared to 9m/08
- Despite lower volumes, Q3/09 production costs in RON/boe were down 5% compared to Q3/08, due to successful implementation of cost reduction initiatives
- Q3/09 oil & gas production reversed its downward trend from Q2/09 as production started at the recently drilled offshore wells Delta 6 and Lebada Vest 4
EBIT decreased to RON 1,747 mn, by 52% compared to 9m/08, due to the significantly lower oil price environment and increased depreciation.
E&P investments in Romania amounted to RON 1,742 mn, 51% lower compared to 9m/08, as the last year period included the acquisition cost of the oil services business of Petromservice. E&P investments accounted for 64% of the total figure in the first nine months of 2009, mainly due to the continued focus on field development and production drilling.
The domestic realized crude price fell by 48% to USD 50.72/bbl compared to 9m/08, due to lower oil prices. The domestic realized crude price in RON/bbl terms decreased by 33% from 9m/08, due to the strengthening of the USD against the RON.
Domestic production costs were USD 14.35/boe, 22% lower compared to 9m/08 due to the strong appreciation of the USD against the RON and successful cost reductions. Domestic production costs in RON/boe increased by 2% compared to 9m/08 due to lower production volumes, although partly offset by cost reduction measures. Q3/09 domestic production costs in RON/boe were down 5% compared to Q3/08, despite lower production volumes, as their effect was mitigated by the lower material and service costs, which were achieved due to cost saving measures.
Petrom SA exploration expenditures amounted to RON 120 mn in 9m/09.
Group oil and gas production decreased by 4% compared to 9m/08, to 51.12 mn boe (187,261 boe/d) as a consequence of lower domestic production. Group oil production was down by 3% compared to 9m/08, reaching 24.94 mn bbl, due to the decrease of domestic oil production.
Total oil and gas production of Petrom SA in Romania amounted to 49.54 mn boe, 5% lower versus 9m/08. Total oil & gas production in Romania in Q3/09 slightly increased compared to Q2/09; this is mainly related to the production start of the key strategic wells (Delta 6 and Lebada Vest 4), which partially offsets the natural decline of the other oilfields. Crude oil production of Petrom SA in Romania was 23.62 mn bbl, 3% lower than the level recorded in 9m/08 mainly due to the reduced number of new wells drilled and the delay of key wells.
Domestic natural gas production reached 3,963 mn cbm, lower by 6% compared to 9m/08. The gas production level was mainly affected by the reduction of demand (partial shutdown of the local fertilizer and other industrial consumers), which caused a high pressure in the transporation system, as well as due to the delays in completion and production startup of key wells in Mamu.
The Drilling Program registered a total number of 75 new wells drilled in 9m/09, considerably lower compared to the same period of the previous year.
Initial production of the offshore well Delta 6 started through the existing Petrom offshore facilities in the first part of Q3/09 at an initial rate of 530 boe/day. At the end of Q3/09, the well was producing approximately 2,650 boe/d. The newly drilled well, Lebada Vest 4, brought on stream at the end of August, was producing around 1,000 boe/d at the end of Q3/09.
Midia C3+ (propane) gas processing plant, near Constanta, was activated at the end of Q3/09 (commissioned in October). The new plant processes the entire offshore gas production of Petrom to sales gas specifications and achieved an efficiency of above 99% C3+ recovery.
In Russia, in the Saratov region, well tests confirmed both oil and gas discoveries in exploration well Lugovaya-1. The evaluation of Lugovaya-1 results is ongoing.
In Kazakhstan, the Komsomolskoe field development made further progress with production approaching 5,000 boe/d by the end of Q3/09. During August, the batch drilling for the fourth horizontal producer was completed and the first oil sales via KazTransOil pipeline network commenced.
Exploration and Production Services (EPS) division continued to implement projects contributing to increasing the service quality and efficiency. A new efficiency increase project was set-up for 2010 and implementation started with a field cluster activity/ process analysis.
Refining and Marketing (R&M)
- The trend of very low refining margins continued, driving reduced utilization rates of the refineries
- Total marketing sales in 9m/09 stable compared to the same period in 08
- Retail sales volumes increased 19% over 9m/08, as a result of the investments in filling stations network optimization, while commercial domestic sales excl. HFO decrease by 11% and export sales were 26% lower
The R&M EBIT recorded in the first nine months of 2009 was of RON (436) mn, weaker compared to the R&M EBIT for 9m/08 when adjusted for the impairment of Arpechim’s net book value at the amount of RON 559 mn (recorded in Q3/08). Despite the good operational performance for the period, the result was negatively impacted by the low utilization of our refining assets under current market conditions. The result was also affectd by relatively lower inventory holding gains (due to the sharp crude price development last year). The above mentioned effects were only partly offset by improvements in the marketing business, namely higher retail sales and reduced costs.
R&M investments were 41% lower compared to 9m/08, reaching RON 403 mn and represented approximately 15% of total investments. In Refining, investments were mainly related to the Fluid Catalytic Cracker (FCC) gasoline post-treater project, the DCS (Distributed Control System) implementation and the systematization and revamp of the Refinery Tanks Farm. The marketing division investments focused on the modernization of oil terminals.
The total quantity of crude processed was of 3,989 kt, 13% lower compared to 9m/08, with imported crude oil representing only 17% of the total quantity of crude processed in 9m/09 [688 kt] compared to 29% in 9m/08.
Overall, the refining margin indicator remained at about the same level as in 9m/08 (USD 0.61/bbl), supported only by the relatively lower cost of own crude consumption within the lower crude pricing environment.
During 9m/09, we decreased utilization rate of our refineries at 67% [9m/08: 76%], optimizing the imports of expensive crude in the current margin environment.
Petrochemical and special product sales were 45% lower than in 9m/08, as the steam cracker unit in Arpechim remained offline throughout 2009.
Total marketing sales stood at 3,731 thousand tons, a 2% decrease compared to 9m/08 sales.
Retail sales also increased in comparison with 9m/08 by 19% to 1,633 mn liters (1,321 kt equivalent), driven by the upgrade of the filling stations network and improved retail station management. Commercial domestic sales amounted to 1,499 thousand tons, 1% above the 9m/08 level, as HFO sales on the domestic market registered a 91% increase compared to 9m/08 due to the Russian-Ukrainian gas crisis at the beginning of the year that forced the district heating power plants to use HFO as substitute for gas. Excluding HFO sales,commercial domestic sales totaled 1,150 thousand tons, 11% below the 9m/08 level. Exported quantities were 26% lower in 9m/09 compared to 9m/08, mainly due to lower HFO and gasoline exports.
Non-oil business turnover increased 11% compared to 9m/08 due to portfolio and procurement optimization.
At the end of Q3/09, Petrom SA had 458 filling stations, while Petrom Group operated a total of 828 filling stations, of which 562 are in Romania and another 266 abroad: 112 in the Republic of Moldova, 95 in Bulgaria and 59 in Serbia.
Gas and Power (G&P)
- Petrom SA gas sales in 9m/09 went down 7%, while the estimated total gas consumption in Romania decreased by 21% over the same period
- Doljchim production continuously adjusted to respond to worsening market conditions, to optimize Petrom's entire gas value chain
- Brazi power plant construction continues according to schedule
EBIT generated by the G&P business of Petrom SA amounted to almost RON 40 mn, down 53% compared to the EBIT recorded in 9m/08, due to the lower gas and chemicals sales, triggered by the lower demand.
In the first nine months of 2009, Petrom SA gas sales decreased by 7% (consolidated gas sales went down 13%) to 3,332 mn cbm while the estimated decrease in total gas consumption in Romania as compared to the same period of 2008 was 21%.
The gas price for Romanian producers was USD 160/1,000 cbm (RON 495/1,000 cbm), down 22% compared to the first nine months of 2008 due to FX effects (unchanged in RON terms since February 2008).
The regulated end-user gas price for households and industrial customers in Romania decreased by 3%, as of May 1st, 2009 and by a further 5% as of July 1st, 2009. However, this had no impact on the gas price for domestic producers.
EBIT recorded by Doljchim in 9m/09 was negative (RON - 59 mn), reflecting the low demand and prices.
The volume of Doljchim sales decreased by 31% to 274 thousand tons. Sales in domestic as well as international markets dropped substantially due to the lack of demand and increasing difficulty of raising finance in the agricultural sector. Therefore, Doljchim was forced to first reduce and then temporarily close down production of fertilizers.
Export sales represented around 29% of total sales.
As Doljchim's activity has been adversely impacted by the economic downturn, we are reviewing an optimum response to the current market conditions.
Investments in G&P amounted at RON 284 mn and mainly comprised investments in the Brazi power plant. Compliance investments in Doljchim totaled RON 7 mn while Power related investments stood at RON 277 mn.
The construction of Brazi power plant continued according to the schedule.
The financials are unaudited and prepared according to RAS; all the figures refer to Petrom SA unless otherwise stated; within the report, figures are expressed in millions and rounded to closest integer value, so minor differences may result upon reconciliation