TNK-BP Reports Fourth Quarter 2009 Results

TNK-BP today reported its results for the fourth quarter and twelve months ended December 31, 2009 (US$ millions unless otherwise stated).

Commenting on the results, Mikhail Fridman, interim Chief Executive Officer of TNK-BP, said:

"2009 was an important year for TNK-BP. Undeterred by market volatility, the company successfully maintained its growth strategy and continued to deliver on the four promises it made at the start of the joint venture relating to production growth, technology transfer, corporate governance and social responsibility.

In production, we achieved 2.9% growth which for the first time was supported by a material contribution from our two new production centres in the Verkhnechonsk area in East Siberia and the Uvat district in the south of the Tyumen region. In addition, we demonstrated that, with the right technology, brownfield areas can continue to shine, as the company's oil fields in the mature Orenburg region increased production by more than 6% in 2009 and we are confident will deliver further growth in 2010.

Continuous application of best technology also enabled TNK-BP to achieve a record 329% reserve replacement on a PRMS basis in 2009, giving an industry-leading 193% average reserve replacement ratio over the past six years.

Advanced technology and project management skills of our multinational team also accelerated work at greenfield licences beyond the Arctic circle in the Yamal peninsula and the north of the Krasnoyarsk region.

Good corporate governance was strengthened by a revised shareholder agreement, the active involvement of independent directors in Board activities, appointments to maintain a strong management team and selection of an independent CEO-designate who will lead the company starting from next year.

Finally, we remain a socially responsible company. The state, as our biggest stakeholder, benefited from continuous success of our operations. TNK-BP paid $16bn in taxes, duties and excises during the year, bringing our cumulative contribution to the state budget since 2004 to over $100bn.

TNK-BP became a safer and cleaner company last year with injury rates continuing to fall and progress made in environmental protection with, for example leak rates falling 11% compared to 2008.

While the global economy may give rise to more business uncertainties in 2010, we will stay focused on developing our major projects which will secure future energy supply and clean high-quality oil products to our consumers."

2009 operational highlights

  • Oil and gas volumes for 2009 increased by 2.9% relative to 2008 (excl. Slavneft) largely due to incremental greenfield production from Uvat and Kamennoye fields in West Siberia, the Verkhnechonskoye oil field in East Siberia as well as continued growth in Orenburg in the Volga-Urals region.
  • The major developments within the Uvat group of fields and the Verkhnechonskoye oil field together with production expansion in the Northern hub of the Kamennoye field cumulatively produced c. 4 mln tones of crude (82,000 barrels per day), or 6% of the total own liquids production volume.The company's oil production growth in the Orenburg region exceeded 6% as a result of enhanced seismic data evaluation to identify and then develop satellites and under-depleted production zones, and improve waterflood performance.
  • In October 2009, the Board of Directors approved the first phase of an investment of $1.3 billion in the five-year program to improve the quality of motor fuels produced by the company to enable us to meet Russian fuel specification regulations by the deadlines of 2012 and 2015.
  • Major turnarounds were carried out at the Ryazan and Saratov refineries ahead of schedule, on budget and without any major safety incidents.
  • The company revitalized its retail rebranding to improve the customer value proposition: 46 service stations were renovated into the new TNK offer and 1 into the BP offer. In addition, in October 2009, the company launched the new branded fuel, TNK Pulsar, with advanced cleaning characteristics compliant with Euro-4 environmental requirements. In 4Q of 2009 the sales of TNK Pulsar amounted to 33% of the total company sales of A95 high-octane gasoline in the regions in which it was launched
  • The company was an active participant in establishing open and transparent oil product exchange trade in Russia. In 4Q 2009, TNK-BP traded 10% of its light oil products at the St. Petersburg exchange.
  • In 2009, the company achieved noticeable improvements in its health, safety and environment record, with the number of major vehicle accidents per one million kilometers driven down by 25and the average rate of utilization of associated petroleum gas reaching 84.4% and the number of oil spills reduced by 11%.

Jonathan Muir, Chief Financial Officer of TNK-BP, said, "This is a good set of results. In 2009, we operated in a weaker trading environment with the Urals export price 36% lower than in the previous year and oil product prices similarly down between 25% and 48%. However, our net income of $5bln was only 6% down year on year, allowing us to increase organic spend and renew our quest for inorganic growth opportunities. This net income performance was due to a combination of our focus on operational efficiency, including cost management and financial discipline, but also the weaker rouble and the stimulus effect of tax incentives introduced by the Russian Government."