Quarter ended 31 December 2010
- Total revenue amounted to MUSD 582.2 (Q4 2009: MUSD 544.7).
- EBITDA amounted to MUSD 118.5 (Q4 2009: MUSD 90.2).
- Profit before tax amounted to MUSD 78.7 (Q4 2009: MUSD 225.6*).
- Net profit for the quarter amounted to MUSD 61.3 (Q4 2009: MUSD 188.3*).
- Net profit for the quarter, excluding the effects of reversed impairment charges, increased to MUSD 58.7 (Q4 2009: MUSD 48.6).
- Basic and diluted earnings per share amounted to USD 0.35 and USD 0.32, respectively (Q4 2009: USD 1.09* and USD 1.00*, respectively).
- 5.6 mbbl (Q4 2009: 5.6 mbbl) of oil were refined and 4.1 mbbl (Q4 2009: 3.9 mbbl) produced.
- Rouble bond offering raised MUSD 170 in February 2011.
Year ended 31 December 2010
- Total revenue amounted to MUSD 2,195.8 (2009: MUSD 1,726.4).
- EBITDA amounted to MUSD 438.4 (2009: MUSD 387.9).
- Profit before tax amounted to MUSD 289.7 (2009: MUSD 418.1*).
- Net profit for the year amounted to MUSD 226.3 (2009: MUSD 345.0*).
- Net profit for the year, excluding the effects of reversed impairment charges, increased to MUSD 223.7 (2009: MUSD 205.3).
- Basic and diluted earnings per share amounted to USD 1.30 and USD 1.21, respectively (2009: USD 2.06* and USD 2.01*, respectively).
- Proved and probable oil reserves increased to 638.3 mbbl (2009: 525.9 mbbl).
- 23.7 mbbl (2009: 21.8 mbbl) of oil were refined and 16.0 mbbl (2009: 16.0 mbbl) produced.
- Eurobond and Rouble bond offerings raised MUSD 515.
- Long-term project financing agreement of MUSD 760 with Vnesheconombank.
- Acquisition of gas stations expanded retail network to the Republic of Buryatia.
Outlook 2011
- Refining volumes and crude oil production targeted to exceed 23 mbbl and 20 mbbl respectively in 2011.
* 2009 results include positive effects from reversal of impairment charges by MUSD 174.7 before tax and MUSD 139.7 after tax.
Dear Shareholders,
In 2010, Alliance Oil Company produced 16.0 million barrels and refined 23.7 million barrels of oil. With a firm focus on organic growth and profitability we increased EBITDA by more than 13% compared to 2009. Our total oil reserves grew by about 30% in 2010 to nearly 1 billion barrels. The expanded reserve base provides the basis for long term production growth above and beyond the 2012 target of producing 90,000 bopd.
Last year, our operations were largely supported by improving markets, both internationally and domestically. Despite higher cost inflation, increased tariffs on transportation, gas and electricity the overall macro environment remained favorable, and our net sales were up by more than 27% in 2010. The price of Brent oil almost reached the level of USD 95 per barrel in the fourth quarter of 2010. The Rouble strengthened against the US Dollar by 4.3% in 2010.
In the upstream segment, crude oil revenues increased by 14.9% in 2010 mainly as markets gradually improved compared to 2009 resulting in higher netback realizations. The main focus remained on the Kolvinskoye oil field in the Timano-Pechora region. 5 new wells were completed and 90 kilometers pipeline from the field to the Musyushor terminal were constructed in 2010.
The company’s exploration and development efforts in 2010 resulted in a significant reserve base enlargement. Total oil reserves grew to 978.8 million barrels while proved and probable (2P) reserves increased by 21% to 638.3 million barrels. The increase in 2P reserves represents an internal reserve replacement ratio of 803.8 %of the total 2010 oil production. The Kolvinskoye field's 2P reserves were up from 153.8 million barrels to 239.3 million barrels. The Volga-Urals and Kazakhstan further contributed 35.0 million barrels to the company's 2P reserves.
In the downstream segment, the Company sold 24.4 million barrels of oil products in 2010. Net oil product prices grew by 15.3% to USD 72.1 per barrel in 2010. Downstream margins continued to improve in the fourth quarter of 2010 compared to the previous period while typical lower seasonal demand affected volumes.
We continued the modernization of the Khabarovsk oil refinery. The electrical desalting and dehydrating section of the crude oil distillation unit was put into operation in November 2010. The retail network was expanded further by acquiring seven gas stations in the Republic of Buryatia. As of December 2010 the Company operated 266 retail stations.
The financial position of the company remained solid. During the year we successfully placed Eurobonds and Rouble bonds, refinanced credit facilities and attracted long-term project financing from Vnesheconombank. The optimization of maturity and currency mix of the debt portfolio continued in 2010. Our present credit ratings are: S&P (B+), outlook “Stable” and Fitch (B), outlook “Stable”.
Outlook
In 2011, positive macroeconomic developments and higher oil prices also trigger increased cost inflation and local currency fluctuations. Alliance Oil expects to benefit from a rapidly increasing share of Mineral Extraction Tax (MET) exempt crude oil production and gradually lowered export taxation of light oil products in coming years. In downstream, in 2011 and 2012 the increased domestic taxes for light products and recently reviewed export duties for light and heavy oil products will reduce net prices in the shorter term. In our model a limited negative effect on downstream margins will reverse to a positive in 2012 as we plan to complete the modernization of Khabarovsk refinery with higher output of light products.
The key strategic projects in 2011 remain the launch of Kolvinskoye oil field in the Timano-Pechora region and the modernisation of the Khabarovsk refinery. In 2012 and thereafter, capital expenditures are expected to decrease as major infrastructure investments in Kolvinskoye and Khabarovsk refinery will be completed.
The 2011 total upstream capital expenditures are planned at 460 MUSD. The Company targets to drill 50 new wells in 2011, including 4 exploration wells. The Kolvinskoye oil field’s capital expenditures are budgeted at around 320 MUSD. We plan to drill 19 new production wells at Kolvinskoye in 2011. Additional infrastructure facilities will be put into operation for the commercial launch of the field in the third quarter of 2011.
The 2011 total downstream capital expenditures are estimated in accordance with existing contractual commitments and planned at 510 MUSD. The upgrade of the Khabarovsk refinery will lead to an increase of light product yield and higher refining capacity. The specifications of diesel and gasoline will comply with Euro-4 standards. The modernisation is expected to proceed without significant interruptions of refinery operations.
Our current crude oil production amounts above 46,000 bopd, and the Khabarovsk refinery’s run-rate is around 70,000 bopd. We target crude production and refining volumes to exceed 20 and 23 million barrels respectively in 2011. The Company’s strategic objective remains to balance upstream production and refining capacity at 90,000 bopd by the end of 2012 and to facilitate growth thereafter. As our reserve base continues to expand, we are developing our plans for long-term production growth above and beyond the 2012 targets.
This year, major investments are targeting stronger operational and financial performance. Large undeveloped oil reserves facilitate for the Company’s oil production growth in years to come. Additional opportunities for growth through acquisitions and joint ventures are continuously reviewed.
Arsen Idrisov, Managing Director
Conference call
Date: Tuesday, 22 February 2011
Time: 10.00 CET
To participate by telephone, please dial:
from Sweden +46 (0)8 5853 6965
from Russia +7 495 705 9451
from other countries +44 (0)20 7138 0829
The presentation will be webcasted live at www.allianceoilco.com and www.financialhearings.com.
A replay of the presentation will be available at www.allianceoilco.com.
For further information:
Arsen Idrisov, Managing Director, Alliance Oil Company Ltd, telephone +7 (495) 777 18 08.
Eric Forss, Chairman of the Board, telephone +46 8 611 49 90.
Alliance Oil Company Ltd is a leading independent oil company with vertically integrated operations in Russia and Kazakhstan. Alliance Oil has proved and probable oil reserves of 638 million barrels, refining capacity of more than 70,000 barrels per day and a network of gas stations and wholesale oil products terminals. Alliance Oil's depository receipts are traded on the NASDAQ OMX Nordic under the symbol AOIL.
