Oil and gas prices running high
The main reason for the very good result was high crude oil and natural gas prices: prices of North Sea Brent crude averaged US$65.14 per barrel, some 20% higher than in 2005.
Gas production up, crude oil production down
"The historic highs for oil and gas prices more than canceled out the decline in oil production," said CFO Lutz-Michael Liebau, summarizing developments in 2006: "At 2.98 billion m3, gas production was about 27% up on the year before. Oil production, by contrast, fell by 18 percent to 3.81 million m3." According to Liebau, the drop in oil production was largely due to the sale of the company's 25% share in the Kazakh company Kazgermunai.
Sales show rise of nearly €300 million
Total sales, as in the year before, again rose by nearly €300 million to €1.77 billion (previous year €1.49 billion).
Marked improvement in profit and value added
Profit before taxes came to €931 million (2005: €482 million); profit after taxes in 2006 amounted to €496 million (2005: €243 million). The RWE Dea group's return on capital employed (ROCE) worked out at 50.7% (2004: 42.1%). In absolute figures, value added came to €455 million (previous year €308 million).
Substantial increase in investment
RWE Dea stepped up its capital expenditure considerably in 2006. At €480.9 million it was 63% higher than the previous year's figure of €296.1 million. Major expenditure arose in connection with the development of gas fields in the southern British North Sea and the drilling program in Libya. Other major investment items were the Snohvit LNG project in the north of Norway and gas and oil projects in Egypt. Further increases in capital spending are planned for the years ahead: "In the next few years we intend to invest about €600 million a year," declared Schoning.
Targeted development of exploration and production
In the financial year 2006, RWE Dea further strengthened its operating business by expanding its exploration and production activities. It is using the latest, highly sophisticated technologies to optimize gas and oil production.
The company's strong position in Egypt was improved by further exploration successes and the acquisition of new concessions. One particularly gratifying development was the substantial gas strikes made in the course of an ambitious drilling program in the offshore region of the western Nile Delta. In Algeria the series of successful gas exploration wells was continued in 2006, and in Libya the first RWE Dea well revealed the presence of oil.
Gas production in the United Kingdom made a good showing, thanks to the development of several small fields. The company also stepped up its ownership of concessions in the British North Sea. The same applies to Norway. Here good progress was also made with the development of the Snohvit gas reservoirs (RWE Dea 2.8%).
Exploration measures in Germany were expanded. Chief Operating Officer Thomas Rappuhn: "Oil and gas production in Germany still accounts for the lion's share of our total production. Through successful exploration we aim to create the basis for further production growth." Further substantial undiscovered oil deposits are believed to exist off the German North Sea coast. RWE Dea as operator therefore investigates the possibilities of exploring for such hydrocarbon deposits off the coast of Schleswig-Holstein with its partner Wintershall Holding AG and off the coast of Lower Saxony with its partner Gaz de France.
Increasing internationalization of workforce
RWE Dea pursues its activities with an efficient organization of 1,051 employees (previous year 940). This is an increase of 11 percent. A further 100 employees are to be taken on during the current year. "For our business to expand as planned, we need more employees with good qualifications and a great sense of commitment. And that goes particularly for the engineering and geoscience sectors," stressed Schoning. By the end of 2006, more than a quarter of the workforce was engaged in foreign operations. Last year saw increases in employee numbers in Egypt, Libya and the UK in particular.
Steady growth targeted
As part of the growth strategy of the RWE Group, RWE Dea is to step up its upstream activities. Schoning: "We have set ourselves the ambitious target of boosting production by about four percent a year for the next ten years. In the gas sector our business helps to ensure that RWE covers the entire value added chain."
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