Alliance Oil: Interim report for the quarter and six months ended 30 June 2012
Quarter ended 30 June 2012
- Revenue of MUSD 817.1, up 4% from Q2 2011.
- EBITDA of MUSD 133.1, up 7% from Q2 2011.
- Profit before tax of MUSD 29.3, down 62% from Q2 2011.
- Foreign currency swap revaluation loss of MUSD 10.8 and currency exchange loss of MUSD 25.9 negatively affected profit before tax.
- Profit for the period of MUSD 19.2, down 66% from Q2 2011.
Six months ended 30 June 2012
- Revenue of MUSD 1,632.3, up 12% from six months 2011.
- EBITDA of MUSD 350.9, up 25% from six months 2011.
- Profit before tax of MUSD 206.8, up 9% from six months 2011.
- Profit for the period of MUSD 158.9, up 9% from six months 2011.
- Cash flows from operations of MUSD 305.0, up 122% from six months 2011.
Subsequent events
- Alliance Oil acquires oil license in Timano-Pechora.
- Repsol and Alliance Oil complete the first phase of exploration and production joint venture in Russia.
Quarter Quarter Six months Six months
ended ended ended ended
30 June 30 June 30 June 2012 30 June 2011
2012 2011
--------------------------------------------------------------------------------Crude oil production, 53,546 41,901 54,968 43,892 bopd Refining volume, bopd 78,404 76,256 76,673 72,132 Revenue, MUSD 817.1 784.2 1,632.3 1,462.9 EBITDA, MUSD 133.1 124.1 350.9 280.4 Profit before tax, MUSD 29.3 76.9 206.8 190.0 Profit for the period, 19.2 56.0 158.9 146.1 MUSD Basic earnings per share, 0.11 0.31 0.91 0.83 USD Diluted earnings per 0.11 0.29 0.85 0.77 share, USD
Dear Shareholders,
The volatility in oil markets in the second quarter of 2012 affected the Company’s financial performance in both segments. The average price of Urals decreased by 9.0% quarter-on-quarter, with significant price movements for crude and oil products within the second quarter. The Russian Rouble weakened against the US Dollar by 2.5%. Overall, the operational performance of the Company’s downstream segment improved further and upstream crude production stabilized in the second quarter of 2012.
The Company’s average daily oil production amounted to 53,546 barrels and the refinery’s daily throughput was 78,404 barrels in the second quarter. EBITDA continued to increase year-on-year but decreased quarter-on-quarter, primarily due to lower export netbacks for crude and oil products, and lower refining margins caused by higher prices for domestic crude oil and lagging sales prices. Net income was negatively affected by foreign currency swap revaluation and currency exchange losses.
In the upstream segment, lower oil prices and higher export duties resulted in crude oil revenue and EBITDA declining despite stable sales volumes. The Company drilled a total of 32 new wells in the quarter, including 5 wells at the Kolvinskoye oil field. The production volumes from the Kolvinskoye field have been stable for the last 4 months, as well workover activity and recentaddition of new wells have compensated natural decline. We continue to increasethe resource base in Timano-Pechora and extend the reach of the Kolvinskoye
field operations. In July 2012, the Company acquired the West-Osoveyskoelicense block east of the Kolvinskoye oil field with significant prospective resources.
In the downstream segment, oil product revenues increased quarter-on-quarter due to record high sales volumes. Meanwhile segment EBITDA decreased as a result of declining net export prices and increasing cost of domestic crude supplies. The rate of progression towards the launch of the modernized Khabarovsk refinery next year has increased in recent months, with 60% of construction works completed to date.
In the first half of this year, cash flow from operations increased by 122% compared to the first half last year. The balance sheet position of the Company remained solid. The total debt to EBITDA ratio remained at the same level as last quarter – 2.3.
Outlook
The macro environment remains volatile. The recent recovery in crude prices is supportive for the upstream segment, while downstream market conditions continue to present challenges.
In the upstream segment, production is stable while the new license block in Timano-Pechora provides opportunities for further reserve and production growth and for realizing synergies with existing operations. Our current objective is to explore the relevant areas of the block to determine recoverable reserves to be incorporated into the development plan for the Kolvinskoye field.
The first phase of the joint venture with Repsol has been completed. The contribution of Tatnefteotdacha by Alliance Oil and the contribution of Eurotek and cash by Repsol to the joint venture are expected to be completed in the fourth quarter of 2012.
In the downstream segment, we are looking forward towards the launch of the modernised Khabarovsk refinery next year followed by the connection of the refinery to the ESPO pipeline. The completion of these projects in the coming year will provide for increased
deliveries of high quality oil products in Far East markets with improvements in efficiency and economics. Oil product demand remains firm with the refinery continuing to process record volumes of oil.
Planned 2012 upstream capital expenditures for existing assets will be further reduced as we continue the revision of drilling plans and implementation of CAPEX efficiency improvements. Downstream capital expenditures remain subject to the actual refinery modernisation progress and are projected at the lower end of the planned range for 2012. We are increasingly evaluating acquisition opportunities to further expand the Company’s oil and gas resource base.
The upstream guidance for 2012 remains an average daily production of 55,000-60,000 barrels. The downstream volume guidance is to refine an average of 72,000-77,000 barrels per day in 2012.
