TAQA's Upstream Revenues Impacted by Lower Oil and Gas Prices

Abu Dhabi National Energy Company PJSC ("TAQA") has reported financial results for the third quarter and the first nine months of 2009.

Key highlights for the first nine months of 2009

  • Total revenue was AED 12.5 billion compared with AED 13.1 billion for the same period in 2008.

Revenue from the electricity and water business, excluding supplemental fuel, increased 13% to AED 4.6 billion, from AED 4.0 billion for the same period in 2008, primarily due to the expansion of Taweelah B and Fujairah I and revenue from the Red Oak tolling contract acquired in December 2008.

Supplemental fuel revenues were AED 2.8 billion in 2009, compared with AED 2.2 billion in 2008. This was due to higher back up fuel costs in 2009, primarily in the domestic subsidiaries, which is then passed through to the offtakers.

Revenue from oil and gas activities (including gas storage and other revenue) decreased 25% to AED 5.1 billion, compared with AED 6.8 billion for the same period in 2008. This decrease was due to the decline in realized crude oil and natural gas prices. These declines were partially offset by additional revenue from TAQA’s North Sea assets acquired in December 2008.

  • Cost of sales were AED 9.1 billion in 2009, an increase of 24% over AED 7.3 billion in 2008, reflecting AED 1.6 billion of costs related to assets acquired in December 2008. It also includes AED 551 million of fuel costs (which are passed through to the offtakers).
  • Administrative and other expenses were AED 570 million in 2009 compared with AED 575 million in 2008.
  • EBITDA was AED 5.8 billion for the first nine months of 2009, versus EBITDA of AED 7.8 billion in the same period in 2008.
  • Net profit, after minority interests, was AED 266 million compared with AED 1.6 billion in the same period in 2008.
  • Basic earnings per share was 4 fils for the period, compared with 35 fils for the same period in 2008.
  • Total assets as at 30 September 2009 were AED 93.1 billion, reflecting recently completed acquisitions.
  • Net cash was AED 4.3 billion, up from AED 4.2 billion at the end of December 2008.
  • Net debt to capital (including minority interests) was 84%, down from 85% at the end of Q2 2009.

Key highlights for the third quarter of 2009

  • Total revenue reached AED 3.9 billion compared with AED 4.5 billion for the same period in 2008, a decrease of 14%.

Revenue from the electricity and water business, excluding supplemental fuel, increased 11% to AED 1.6 billion, from AED 1.5 billion for the same period in 2008. This increase was primarily due to the expansion of Taweelah B and Fujairah I and revenue from the Red Oak tolling contract acquired in December 2008.

Revenue from oil and gas activities (including gas storage and other revenue) declined 33% to AED 1.5 billion, compared with AED 2.2 billion for the same period in 2008, driven by the decline in realized prices.

  • Cost of sales were AED 2.8 billion in 2009, an increase of 9% from AED 2.6 billion in 2008. The increase was primarily driven by additional operating costs related to new acquisitions in December 2008, which was partially offset by overall lower operating costs.
  • Administrative and other expenses were AED 219 million in 2009 compared with AED 193 million in 2008.
  • EBITDA was AED 1.9 billion for the third quarter of 2009, versus EBITDA of AED 3.0 billion in the same period in 2008.
  • Net profit, after minority interests, for the quarter was AED 90 million compared with AED 723 million in the same quarter in 2008.
  • Basic earnings per share were 2 fils for the quarter, compared with 13 fils for the same period in 2008.

Carl Sheldon, General Manager of TAQA, said, "The value of our diversified business model has been amply demonstrated through the stable cash flows generated by our downstream assets, which have offset the greater volatility of our upstream business.

"During the quarter and throughout the year, TAQA has made significant progress in maximizing its existing assets. Not only did we take over the operatorship of the North Sea Brent pipeline system and facilities in August, but were also appointed operator of the L11BA platform in the Dutch North Sea, which we took over from Chevron. In the past month, we passed another milestone, having brought our first new well on-stream in the UK North Sea, effectively boosting European production by 10,000 barrels of oil equivalent a day.

"In October, we were pleased to announce, on behalf of the Bergermeer Gas Storage Consortium, a positive final investment decision for what will be Europe’s largest gas storage facility with third party access. This will position TAQA at the heart of Europe’s future energy system.

"I firmly believe that our global energy assets present our investors with significant potential value and our focus now is on fulfilling this through the optimisation of our existing portfolio into 2010 and beyond.”

Market overview

Year-on-year comparisons are affected by a significant difference in commodities pricing, especially when compared to Q3 2008 during which oil prices reached a peak of over US$140, before falling below US$35 in Q1 2009. However, prices have slowly recovered throughout 2009. WTI spot prices averaged US$43.18 for Q1, US$59.69 for Q2 and US$68.14 for Q3. Brent followed a similar trajectory at US$45.04 for Q1, US$59.28 for Q2 and US$68.25 for Q3.

Nymex Henry Hub prices averaged US$3.44 per mmbtu for Q3 versus US$3.81 for Q2. This can be contrasted to Q3 2008 when the average price was US$8.95.

Upstream and midstream

  • Upstream activity generated revenues of AED 1.5 billion (including gas storage and other revenue), 48% of total revenues.
  • Total production was 132.6 thousand barrels of oil equivalent per day (mboe/day) in the third quarter of 2009, split between TAQA North (88.4 mboe/day), TAQA Bratani (39.7 mboe/day) and TAQA Energy (4.5 mboe/day), and is up from 110.5 mboe/day in the third quarter of 2008.
  • TAQA Bratani has shown the greatest production increase, with production growing from 10.7 mboe/day to 39.7 mboe/day in the third quarter, an increase of 271% over the same period last year. This increase is a direct result of the integration of the assets acquired in December 2008.
  • TAQA North production declined by 5% due to decreased capital investment as a result of lower gas prices.
  • Average net realized price of crude oil sold was US$58.51 per barrel for TAQA North and US$45.01 per barrel for TAQA Bratani.
  • Average net realized price for natural gas sold was US$2.96 per thousand cubic feet (mcf) for TAQA North, US$4.93 per mcf for TAQA Bratani and US$6.70 per mcf for TAQA Energy.

Finance

  • Finance costs have decreased year-on-year, to AED 904 million in the third quarter compared with AED 984 million for the same period in 2008, as a result of TAQA’s bond buyback programme during the year and lower interest rates on floating debt.
  • TAQA benefited from a gain in the fair value of derivatives of AED 146 million versus a loss of AED 32 million for Q3 2008. This relates to hedging in place at the Red Oak facility.
  • TAQA recorded a foreign exchange loss of AED 69 million, versus a gain of AED 84 million in Q3 2008. This was due to currency movements relating to the refinancing of debt in the Moroccan subsidiary and the devaluation of the Euro and Sterling against the U.S. dollar.
  • In September TAQA raised US$1.7 billion through a bond offering, the proceeds of which were used to pay down a revolving credit facility and to finance the acquisition of DSM Energy (which closed on 01 October).
  • In early July, following a change in Standard & Poors' methodology for rating government related entities, TAQA terminated its relationship with this credit rating agency. TAQA continues to be rated Aa2 by Moody's.
     
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Brent Crude Oil : $48.6/BBL 1.12%
Light Crude Oil : $46.34/BBL 1.24%
Natural Gas : $2.9/MMBtu 2.35%
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