Oil Refineries Announces Financial Results for Full Year 2008

HAIFA, Israel - Consolidated Reported Loss Totalled $109 Million, Resulting From the
Extreme Volatility in Oil Prices

- Refining Sector Adjusted EBITDA[i] Reached $180 Million, Compared to
$162 Million in 2007

- Adjusted Refining Margin 5.7 $/bbl, Compared to 5.5 $/bbl Reuters’
Quoted Mediterranean Ural Cracking Margin Benchmark

- Refined Quantity Increased 6% yoy; Utilization Reached Record Levels of
92%, Compared to 86% in 2007

- Trade Sector Contributed $13 Million to Gross Profit During First Year
of Operation

- Working Capital Requirements Down by $317 Million Compared With the
Beginning of 2008, Following Decline in Oil and Product Prices

- Board Decided to Not Pay 2008 Bonuses to Management and
Employees; This Due to the Reported Results, Despite Improvement in
Operating Performance and Majority of Defined Milestones Being Met.

Oil Refineries Ltd. (TASE: ORL.TA) (”Oil Refineries” or the
“Company”) announced today its financial results for three and twelve month
periods ending December 31, 2008. Results reported in US Dollars and under
International Financial Reporting Standards (IFRS).

Full Year Highlights (Compared to 2007)

- Adjusted refining margin of USD/bbl 5.7, compared to the
average Reuters’ quoted Mediterranean Ural Cracking Margin for 2008 of
USD/bbl 5.5. Adjusted margin for 2007 totaled USD/bbl 6.1

- Adjusted EBITDA for the refining sector totaled $180 million, compared
to $162 million in 2007

- Cash flow generated from operating activities totaled $223 million for
the year

- EBITDA for the trade sector, established in the first quarter 2008,
totaled $11 million in its first year of activity.

During 2008, crude oil and product prices were highly
volatile. During the year, the price of crude oil declined from $96 per
barrel at the end of the fourth quarter 2007 to $36.5 per barrel at the end
of 2008. The majority of the decline was in the fourth quarter, which started
the quarter at $94 per barrel. The Company maintains a basic un-hedged
inventory of 600,000 tons of crude oil, and this based on Company policy. The
change in the value of this inventory does not draw a cash flow impact on the
Company.

Since the end of 2008, oil prices have risen 37%, with the oil
reaching $50 per ton. Subsequently, the Company expects to record an $85
million gain resulting from the reversal of part of the decline in inventory
value recorded in 2008.

The Company, similar as the majority of global refiners and
marketers of oil and its products, does not hedge its basic inventory. The
impact of changes in the value of this inventory, is not of a cash flow
nature, and therefore the following results are also adjusted to net out
these impacted, in addition to buying and selling timing and derivative
accounting method under IFRS. This, in order to enable a common base for
comparison of the Company’s ongoing operations.

The decline in oil and its products prices bore a substantial
positive contribution to the Company’s working capital requirements, such
that by the end of 2008, working capital requirements declined by $317
million, compared to the beginning of the year. This decrease in working
capital requirements grants the company additional flexibility in utilizing
its available resources, as well as reducing financing costs.

Full Year 2008 Results

Adjusted refining margin for the year totaled USD/bbl 5.7
(USD/ton 41), compared to the average Mediterranean Ural Cracking Margin
quoted by Reuters for 2008 of USD/bbl 6.7. Adjusted refining margin for 2007
totaled USD/bbl 6.1 (USD/ton 44.2).

Refining and Trade sector annual adjusted EBITDAi reached $191
million in 2008, compared to $162 million in 2007.

Revenues for the year reached $8,258 million, compared to
$5,234 million last year. Despite the decline in local demand for refined
produce, the Company continued to increase sale volumes and market share.

Refined capacity for the year (in tons) increased by 6%
reaching 8,245 thousand tons. Utilization rate for the year totaled 92%,
compared to 86% last year.

Consolidated reported EBITDA for 2008 totaled $76 million,
compared to $354 million in 2007.

Tax income for the year totaled $110 million dollars in 2008,
compared to a tax expense of $45 million dollars last year. The move to a tax
income in 2008 primarily follows the receipt of tax benefit for previous
years to the amount of $44 million, resulting from the Company receiving
initial ‘approved factory’ status, as well as lower profits.

Consolidated net loss for the year totaled $109 million,
compared to a net income of $142 million in 2007, primarily from the write
off of un-hedged inventory, resulting from price volatility.

Fourth Quarter 2008

Adjusted refining margin for the quarter totaled USD/bbl 5.5
(USD/ton 40.3), compared to the average Mediterranean Ural Cracking Margin
quoted by Reuters for the quarter of USD/bbl 5.3 (38.7 USD/ton). Adjusted
refining margin for the fourth quarter 2007 totaled USD/bbl 3.6 (USD/ton
26.1)

Refining sector fourth quarter adjusted EBITDA[i] reached $53
million, compared to $6 million in the fourth quarter 2007. The trade sector
contributed a further $3 million to the EBITDA.

Consolidated reported EBITDA for the fourth quarter 2008
totaled a loss of $299 million, compared to an income of $97 million in 2007.

Consolidated net loss for the fourth quarter 2008 totaled $182
million, compared to a quarterly net income of $18 million in the fourth
quarter 2007, primarily from the write off of un-hedged inventory and decline
in prices.

Mr. Yashar Ben Mordechai, CEO of Oil Refineries commented:
“The decline in crude oil prices over the past year impacted the Company’s
basic inventory which, from a responsible and long term prospective, is not
hedged, similar as the majority of the world’s refining and fuel marketing
companies, drawing substantial non-cash inventory losses in the financial
statements. With a business and operative view, the Company continues to
increase its market share while increasing product quantities sold, despite
the decline in overall consumption. The implementation of the new
organizational structure, enabled the Company to increase focus on its main
segments of activity, drawing an increase in utilization levels to 92%, a new
Company record. The Company continues to develop its new international trade
sector, incorporating logistic mediums such as naval transport and storage.
The expanding trade activities contribute to higher profitability,
substantially enhancing the manufacturing facilities’ optimization, while
increasing the Company’s sales in both Israel and overseas. As part of the
Company’s plan for 2009, ORL announced a series of efficiency measures in a
wide variety of areas including manufacturing, logistics, purchasing and
outsourced projects. As part of these measures, the Company’s management team
took a 10% salary cut in 2009 salaries, and a substantial number of
outsourced projects were transferred back under the responsibility of Company
employees.”

Mr. Ben Mordechai added that, “The Company reviewed its steps
in detail when it compiled its strategic plan, taking into account both its
strengths, namely: the high technological level of its workforce, among the
highest in the world, the integration of the petrochemical industries with
the refining, its excellent strategic location with good access to a wide
variety of crudes as well as to fast growing markets, in addition to its
advanced infrastructure at its central Haifa facility. We continue to
strengthen the Company’s core businesses through continued focus and
investment prioritization, as well as improving the facilities’ efficiency
and effectiveness, measures which are already bearing fruits as visible in
the increased utilization rates and refining capacities.”

Mr. Yossi Rosen, Chairman of the Board of Oil Refineries
added: “ORL is responding, and swiftly adapting itself, to the changing
economic environment both globally and in Israel, and continues to implement
efficiency measures, freeing up resources, and laying the foundations for
long term growth. The Board’s decision to continue to invest in strengthening
the Company’s core assets serves as a vote of confidence, on the part of the
shareholders, in both the Company and its management’s capabilities. We
continue to move to implement the hydrocracker project and believe that
especially in times of global economic crisis, there is the opportunity to
undertake the project at substantially lower costs. This is, without a doubt,
a project of national importance which will supply work for thousands of
employees in the coming years. We hope that the government will act, as part
of the expected new economic scheme, to encourage such projects”

Mr. Rosen added that: “Even though we have not yet undertaken
the merger with Carmel Olefins, the two companies are actively working
together to leverage the inherent synergies, and this, until the conditions
for a full merger occur.”

Conference Call

The Company will also be hosting a conference call later today
at 8:30am EDT. On the call, management will present a presentation reviewing
the fourth quarter and full year 2008 highlights and industry trends. The
presentation can be downloaded from the Company’s website
www.orl.co.il : Investor Relations > Financial Reports prior to the
call. To participate in the conference call, please call one of the following
teleconferencing numbers. Please begin placing your calls at least 10 minutes
before the conference call commences. If you are unable to connect using the
toll-free numbers, please try the international dial-in number.

US Dial-in Numbers: 1-888-723-3164

UK Dial-in Number: 0-808-101-2717

Israel Dial-in Number: 03-918-0610

International Dial-in Number: +972-3-918-0610

at: 8:30am Eastern Daylight Time, 5:30am Pacific Time; 1:30pm UK, 3:30pm
Israel

A replay of the call will be available, after the call, on the Company’s
website at www.orl.co.il.

About Oil Refineries Ltd.

Oil Refineries Ltd. (ORL), located in the bay area of the city
of Haifa, operates Israel’s largest oil refinery. ORL operates sophisticated
and state-of-the-art industrial facilities with refining capacity of 9
million tons of crude oil per year, with a Nelson Complexity Index of 7.4,
providing a variety of quality products used in industrial operation,
transportation, private consumption, agriculture and infrastructure. The
Company is also active in the area of Polymers and Aromatics through its
holdings in Carmel Olefins Ltd and Gadiv Petrochemical Industries Ltd. The
Company also provides power and heat services to industrial customers in the
Haifa Bay, as well as infrastructure services. ORL is traded on the Tel Aviv
Stock Exchange under the ticker ORL. For additional information please visit
the Company’s website: www.orl.co.il.

The above noted in this release includes forward-looking
statements based on Company data, as well as Company plans and estimations
based on this data. The activity, results and other data may be substantially
different in reality given uncertainty and various risks, including those
discussed under risk factors in the Company’s financial statements and
Director’s reports.

———————————

[i] Adjusted EBITDA relates to the reported EBITDA, net of inventory
losses, buy\sell timing differences and IFRS-derivative transaction recording
impact.

Oil Refineries Ltd.

Selected Pro-forma Consolidated Data from the Report of the Board of
Directors on the State of the Corporation’s Affairs for the Period

Refining Trade
Year ended December 31
2008 2007 2008 2007

Revenue 6,913 4,416 383 -
Inter-company operations 707 594 - -

Total sales 7,620 5,010 383 -

Cost of sales 7,629 4,665 370 -
Inter-company operations 57 45 - -

Total cost of sales 7,686 4,710 370 -

Gross profit (loss) (66) 300 13 -

Selling, general and
administrative
expenses 54 54 2 -

Other (income) expenses - 23 - -

Operating profit (loss) (120) 223 11 -

Financing income (expenses)

Share in the profit
(loss) of investees

Profit (loss) before
taxes on income

Tax benefits (income tax)

Net profit (loss)

…continued

Petrochemicals
Polymers Aromatics
Year ended December 31
2008 2007 2008 2007

Revenue 475 342 487 476
Inter-company operations - - 57 45

Total sales 475 342 544 521

Cost of sales 256 100 61 65
Inter-company 255 194 449 394
operations
Total cost of sales 511 294 510 459

Gross profit (loss) (36) 48 34 62

Selling, general
and administrative
expenses 30 19 26 25

Other (income) expenses (14) 3 - 2

Operating profit (loss) (52) 26 8 35

Financing income (expenses)

Share in the profit
(loss) of investees

Profit (loss) before
taxes on income

Tax benefits (income tax)

Net profit (loss)

…continued

Adjustments
to consolidated Consolidated
Year ended December 31
2008 2007 2008 2007

Revenue - - 8,258 5,234
Inter-company operations (764) (639) - -

Total sales (764) (639) 8,258 5,234

Cost of sales - - 8,316 4,830
Inter-company operations (761) (633) - -

Total cost of sales (761) (633) 8,316 4,830

Gross profit (loss) (3) (6) (58) 404

Selling, general
and administrative
expenses (4) (4) 108 94

Other (income) expenses - - (14) 28

Operating profit (loss) 1 (2) (152) 282

Financing income (expenses) (61) (102)

Share in the profit
(loss) of investees (3) 7

Profit (loss) before
taxes on income (216) 187

Tax benefits (income tax) 107 (45)

Net profit (loss) (109) 142

Oil Refineries Ltd.
Consolidated Balance Sheet

In thousand US Dollars

2008 2007

Assets

Cash and cash equivalents 14,840 259,325
Short-term deposit 25,000 -
Derivatives at fair value through profit or loss 15,374 6,513
Investments in other financial assets at fair 101,509 113,035
value through profit or loss
Trade receivables 253,215 394,470
Other receivables 82,642 76,381
Inventory 569,407 1,042,545
Current tax assets 42,047 10,153
Total current assets 1,104,034 1,902,422

Investments in investee companies accounted by the 36,005 53,958
equity method
Loan to Haifa Early Pensions Ltd. 84,740 80,038
Long term loans and debit balances 2,606 2,026
Derivatives at fair value through profit or loss 64,369 4,176
Employee benefit plan assets 5,007 7,519
Property, plant and equipment 1,083,446 978,722

Intangible assets and deferred expenses, net 25,170 22,614

Total non-current assets 1,301,343 1,149,053

Total assets 2,405,377 3,051,475

The notes to the financial statements are an integral part of the
financial statements.

Oil Refineries Ltd.
Consolidated Balance Sheet (cont.)

In thousand US Dollars

2008 2007

Current liabilities
Bank overdrafts 28,973 948
Loans and credit 351,366 215,073
Trade payables 270,594 559,695
Other payables 70,056 88,820
Derivatives at fair value through profit or loss 1,853 1,595
Provisions 12,949 15,677
Total current liabilities 735,791 881,808

Non-current liabilities
Debentures 726,554 717,302
Bank loans 233,749 452,154
Liabilities for finance lease 8,448 7,763
Other long-term liabilities 7,394 -
Derivatives at fair value through profit or loss 6,900 -
Employee benefits 68,845 67,358
Liabilities for deferred taxes 65,827 125,287
Total non-current liabilities 1,117,717 1,369,864
Total liabilities 1,853,508 2,251,672

Shareholders’ equity
Share capital 472,478 472,478
Capital reserves 20,953 29,036
Retained earnings 58,438 298,289
Total equity attributed to equity holders of the 551,869 799,803
Company

Total liabilities and capital 2,405,377 3,051,475

Oil Refineries Ltd.
Consolidated Profit and Loss Statements

In thousand US Dollars

2008 2007

Revenue 8,257,458 5,234,483

Cost of sales, refinery and services 8,324,149 4,816,511
Revaluation of open positions in derivatives on
prices of goods and margins, net (7,465) 13,626
Total cost of sales 8,316,684 4,830,137

Gross profit (loss) (59,226) 404,346

Selling expenses 40,582 35,010
General and administrative expenses 67,061 59,360
Reduction of negative goodwill created upon
acquisition (14,535) -
Privatization grant - 28,360

Operating profit (loss) (152,334) 281,616

Financing revenue 64,979 (12,361
Financing expenses (126,034) (114,284)
Financing expenses, net (61,055) (101,923)

Company’s share in profits (losses) of investees
(net of tax) (3,111) 6,913

Profit (loss) before taxes on income (216,500) 186,606

Tax benefits (taxes on income) 107,292 (44,937)

Net profit (loss) for the year (109,208) 141,669

Earnings (loss) per share

Net basic and diluted earnings (losses) per ordinary
share (in USD) (0.055) 0.071

The notes to the financial statements are an integral part of the
financial statements.

Contacts

Company Contact:
Igal Salhov, Chief Financial Officer,
Oil Refineries
Tel. +972-4-878-8152
ContactIREn@orl.co.il

Investor Relations Contact:
Ehud Helft \ Fiona Darmon
GK Investor Relations
Tel. (US) +1-646-797-2868 \ (Int.) +972-54-566-3221
info@gkir.com

Source: Oil Refineries Ltd

Contacts: Company Contact: Igal Salhov, Chief Financial Officer, Oil Refineries, Tel. +972-4-878-8152, ContactIREn at orl.co.il; Investor Relations Contact: Ehud Helft \ Fiona Darmon, GK Investor Relations, Tel. (US) +1-646-797-2868 \ (Int.) +972-54-566-3221, info at gkir.com