TNK-BP reported its results for the nine months ended September 30th, 2010.
"TNK-BP's robust operating and financial performance this year is further evidence of the strength of our management team and excellent cooperation at the shareholder level," said, Mikhail Fridman, Executive Chairman of TNK-BP Ltd.
"Strong results of our business in Russia, combined with our recently announced agreements to acquire assets in Venezuela and Vietnam, provide TNK-BP with a solid platform for further growth and profitability."
9 Months 2010 operational highlights
- Oil and gas production in 9M 2010 increased by 3.4% to 1,734 mboed compared to 9M 2009 (excluding Slavneft).
- Production growth in 9M 2010 was driven by greenfield projects and growing production in the Orenburg region. The major greenfield projects in Uvat, Verkhnechonskoye and the northern hub of the Kamennoye oil field contributed 11% to the overall liquids production. Total greenfield production doubled on 9M 2009.
- 20 exploration wells were completed in the 9M 2010 with a 65% success rate.
- The Company acquired 8 licenses in 9M 2010 through auctions and acquisitions in Orenburg, adding the total of more than 250 mmboe of estimated new resources.
- Rospan production in 9M 2010 increased to 1.9 bcm, up 12% over 9M 2009 thanks to additional pipeline access negotiated with Gazprom.
- In September, a long-term gas transportation agreement was signed between Gazprom and Rospan, granting the Company access to the pipeline system for 6 years and up to 13.2 bcma in 2016.
- The Samotlor gas gathering project received approval for the right to sell Emission Reduction Units under the Kyoto protocol. The project allows utilization of 90 mln cubic meters of associated petroleum gas and received the highest score among the 35 projects reviewed by Sberbank Expert Council.
- In the Downstream segment, the Company achieved an all-time high average daily throughput of 715 mbpd and saw robust refining margins of over $12/bbl in 9M 2010.
- In 9M 2010, TNK-BP exported 1.9 mln tones of crude (including over 1.4 mln tones of crude produced at the Verkhnechonskoye oil field in East Siberia) through the East Siberia - Pacific Ocean pipeline (ESPO) diversifying the company's export channels. A one-year term contract was signed with PetroVietnam for monthly crude deliveries via ESPO.
- In 9M 2010, TNK-BP continued to improve its HSE track record, with Days Away From Work Cases down 4% (compared to 9M 2009), spills frequency down 15% (compared to 9M 2009) and zero major vehicle accidents during the reporting period.
Jonathan Muir, Chief financial officer, said, "In the first nine months of 2010, the trading environment continued to improve. The Urals export price was 34% higher relative to the same period last year which led to a 24% increase in the domestic oil price. The company successfully proceeded towards its strategic objective to achieve industry-leading efficiency and grow the scope and scale of its operations.
"Our financial results benefited from a rising greenfield contribution and incremental production in the Orenburg region as well as higher downstream margins. Net income increased by over 5% to USD 3.9 billion while EBITDA rose by 9% year-on-year. The company increased its organic spend by 31% to USD 2.7 billion and made a huge step towards completion of two significant international acquisitions. Our performance was underpinned by a focus on execution and cost management to mitigate the industry inflationary effects and the negative duty lag effect. Finally, we maintained our financial discipline with gearing at 20% and a strong cash position exceeding US $2B at the end of the period."
9 Months 2010 financial highlights
- Revenues for 9M 2010 increased by 30% relative to 9M 2009 due to stronger market conditions.
- Export duties and taxes other than income tax increased by 54% for 9M 2010 relative to 9M 2009 largely due to the effect of the Urals price increase on export duty and mineral extraction tax rates.
- Cash costs (operating expenses, transportation and SG&A) increased by 17% reflecting the effect of a stronger ruble exacerbated by increased transportation and electricity tariffs.
- EBITDA for 9M 2010 amounted to $7.2B which is 9% higher compared to the same period in 2009 largely due to the increase in revenue partly offset by higher taxes and costs.
- Income tax in 9M 2010 is 18% higher relative to 9M 2009 due to the increased pre-tax profits as well as a one-off reduction of tax audit provision in 9M 2009.
- Net income for 9M 2010 amounted to $3.9B which is 5% higher compared to the same period in 2009 due to the increase in EBITDA partly offset by increases to tax and legal provisions.
- Cash from operations in 9M 2010 totaled $6.9B representing an increase of 50% compared to 9M 2009.
- Net debt was reduced by $0.8B resulting in gearing falling to 20%.
- Organic capital investment in 9M 2010 amounted to $2.7B, aimed at focused development of both greenfields and brownfields together with targeted retail and refining spend.