Abu Dhabi National Energy Company PJSC (TAQA) reported its financial and operational results for the third quarter and first nine months of 2010.
Higher supplemental fuel income, plus a more positive commodity pricing environment and higher oil and gas production, saw a 33% increase in revenues. Excluding supplemental fuel income, underlying operational revenues increased 18%. Combined with the contribution from TAQA's stake in Sohar, this resulted in a 142% increase in net profit for the quarter.
H.E. Abdulla Saif Al-Nuaimi, CEO & MD of TAQA, said, "Once again our results demonstrate our progress against our strategic objectives. TAQA's global portfolio has yielded a strong financial performance and a continued increase in revenues, which combined with careful management has resulted in another quarterly uplift in net profit.
"I feel confident that TAQA's portfolio and footprint will continue to yield positive results to the benefit of our shareholders in the months and years to come."
Carl Sheldon, General Manager of TAQA, said, "Over the course of the last three months, in response to the more positive commodity pricing environment and as a result of our asset optimization work and acquisitions, we have increased production in our Upstream assets. Combined with stable revenues from our Power & Water portfolio, this has resulted in a strong increase in our top line.
"We continue to add to our footprint in the UK North Sea, with the acquisition of the Otter field from TOTAL and the award of licences from the UK's Department of Energy and Climate Change in the latest licensing round. This license acreage, strategically located adjacent to existing infrastructure, positions us well for future growth, as does our drilling program in North America."
Total revenues for the third quarter were AED 5.2 billion in 2010, 33% higher year-on-year, compared with total revenues of AED 3.9 billion for the same period in 2009. This is partially due to a large increase in supplemental fuel income, as a result of higher use of back up fuel in the domestic subsidiaries over the summer months, plus higher revenues at Red Oak in North America.
Excluding supplemental fuel income and liquidated damages from the late delivery of Fujairah 2, underlying operational revenues increased 8%, reflecting slightly increased production from TAQA Bratani, plus more favorable prices in crude oil and natural gas. Higher production at TAQA Energy reflects the inclusion of production from DSM, which TAQA acquired in October 2009.
Power & Water revenues increased by 18% quarter-on-quarter, largely reflecting increased generation capacity at Taweelah A1 and liquidated damages of AED 311 million received as a result of a delay in the completion of the Fujairah 2 plant. However, over the nine month period, revenue increased from AED 4.6 billion to AED 4.7 billion, which can be attributed to expansion at Taweelah.
Cost of sales increased from AED 2.8 billion in Q3 2009 to AED 3.3 billion in Q3 2010, reflecting fuel expenses which relate directly to the supplemental fuel income.
The year-on-year increase in net income also reflects the share of income from the Sohar aluminum plant, effective 01 January 2010, and liquidated damages received in relation to a delay in completion of the Fujairah 2 plant.
Total revenues from Power & Water increased by 18% to AED 1.9 billion for the quarter.
Technical availability at TAQA's domestic power utilities exceeded 98%, with its international portfolio recording 93%. With an average technical availability of 97% across the portfolio, this underlines the high quality nature of the assets and their efficient operation.
Total power generation during the quarter increased by 2% relative to the same quarter in 2009.
During the third quarter, ADWEA transferred 90% of their interest in the Fujairah 2 plant to TAQA, giving TAQA a 54% interest in the facility. Due to a delay in the completion of the Fujairah 2 plant, TAQA received net liquidated damages of AED 311 million, recorded under revenues. Fujairah 2 is now expected to be complete by the end of 2010.
Oil and gas revenues in Q3 2010 were AED 1.8 billion, an increase of AED 0.3 billion compared to AED 1.5 billion in 2009. This 18% increase was driven primarily by the increase in crude oil and natural gas prices and higher volumes from the DSM assets acquired in October 2009. The increase was partly offset by higher royalty payments.
WTI oil price averaged $76.08/bbl in the quarter up from $68.52 in Q3 2009. Prices for Brent Crude increased from an average of $75.31/bbl in Q3 2009 to $78.10/bbl in Q3 2010. Henry Hub gas prices for the quarter averaged $4.27/mcf, up from $3.17/mcf for Q3 2009.
Production levels at TAQA NORTH remained strong at 88.2 mboe/day in the third quarter of 2010. TAQA NORTH continued to enjoy success with its horizontal drilling program at the Bakken fields in Saskatchewan and the northern United States. Additionally, recent test results on the first two wells in TAQA NORTH's Cardium oil play have exceeded expectations. The Cardium wells are part of a ten well delineation program that could ultimately lead to the drilling of several additional horizontal oil wells over a five year period.
In the Horn River Basin in Canada, TAQA plans to build an all weather road, a pipeline and drill two horizontal wells. The wells will be tested for an extended period to evaluate the production characteristics of the shale on TAQA's land. Success of this program may lead to a further drilling.
Production volumes at TAQA Bratani were consistent with the third quarter of 2009 at 40.2 mboe/day.
In September, TAQA Bratani signed a sale and purchase agreement relating to TOTAL's entire equity stake of 81% in production licenses for two blocks (P.226 Block 210/15a and P.1021 Block 210/20d) in the Otter Field Development Area. Otter lies adjacent to TAQA Bratani's existing North Sea interests and is a sub-sea tieback to the TAQA Bratani operated Eider Platform.
At TAQA Energy has increased its shareholding in the Bergermeer Gas Storage project to 60% after acquiring a 24% stake previously owned by Dyas B.V. and Petro-Canada Netherlands B.V. Dutch State participant EBN holds a 40% stake in the project.
TAQA Energy is also planning to restart oil production at the Rijn field in the Netherlands in November 2010. The Rijn oil field was discovered in 1982 in block P15 40 kilometers offshore Rotterdam and oil production came onstream in 1985. After more than a decade of production, the oil facilities were shut down in 1998.
However, following advances in technology, TAQA Energy plans to re-commission the Rijn field. The project consists of workovers on five oil wells, five water injection wells and an upgrade of the offshore P15-C processing facilities.
Post-quarter corporate developments
In October 2010, TAQA appointed David Cook as Executive Officer and Head of Upstream to lead TAQA's global upstream division. David joins TAQA following more than 20 years with BP, TNK-BP, and Amoco. In his new role, David will report directly to H.E. Abdulla Saif Al-Nuaimi, CEO and MD, and Carl Sheldon, General Manager, and will be based at the Group's corporate headquarters in Abu Dhabi.
In late October 2010, the UK's Department of Energy and Climate Change (DECC) announced the awards for the 26th Seaward Licensing Round. This is the first round of licensing in which TAQA participated and the Company was successful in three of its five bids. Two of the awards are located in the Northern North Sea, Block 211/26c immediately east of Cormorant and Blocks 211/26d and 3/1b southwest of Pelican. The third award, a joint bid with Nippon, TAQA's partner in Brae, is northwest of the North Brae field.
In early November, TAQA announced that it has mandated The Bank of Tokyo-Mitsubishi UFJ, Ltd., BNP Paribas, Citi, HSBC, The Royal Bank of Scotland PLC and Standard Chartered Bank to arrange a US $3.0 billion revolving credit facility. The facility will be used for general corporate purposes and will replace the existing US $3.15 billion revolving credit facility signed in August 2008.
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