Oil Refineries Announces Results for First Quarter 2011
By Oil Refineries Ltd, PRNESunday, May 22, 2011
HAIFA, Israel, May 23, 2011 -
- Net Income Totals $6 Million
- Adjusted consolidated EBITDA of $55 million in the first quarter of
2011, compared with $33 million in the first quarter of 2010
- Adjusted consolidated EBITDA in Petrochemical segment of $49 million in
the first quarter of 2011, compared with $30 million in the first quarter of
2010
- Adjusted refining margin USD/bbl 3.9, compared with USD/bbl 0.5 average
Reuter's quoted Mediterranean Ural Cracking Margin and compared with an ORL
refining margin USD/bbl 3.2 in the first quarter of 2010
- On Friday, May 20, 2011, Oil Refineries signed an agreement with
"Tethys Sea" Group for the purchase of natural gas totaling about 1.2 BCM, in
order to ensure a continuous supply in the coming years.
Oil Refineries Ltd. (TASE: ORL.TA) (hereinafter "the Company,"
"ORL"), Israel's largest integrated refining and petrochemical group,
announced today its financial results for the first quarter ending March 31,
2011. Results are reported in US Dollars and under International Financial
Reporting Standards (IFRS).
Mr. Pinhas Buchris, CEO of Oil Refineries: "Oil Refineries
recorded a higher refining margin than the benchmark margin and presented
impressive growth in its petrochemicals sector. The earthquake and tsunami in
Japan created a spike in demand for petrochemical products in international
markets, which the Company was able to identify and swiftly prepare itself in
order to meet these market needs. During the first quarter of this year, the
Company gradually returned to full production following the fourth quarter of
2010, during which the Company shut down some of its facilities in order to
carry out periodic maintenance. After the reporting period, ORL completed the
connection of its facilities to the natural gas pipeline and secured the
necessary permits for the use of natural gas. In recent months, there were
two incidents of sabotage along the Egyptian gas line. Following the second
attack, after which the gas supply from this line was not resumed and the
Company did not receive any natural gas from EMG, ORL decided to acquire
natural gas from another natural gas provider. This additional supply
agreement will allow the company to quickly switch over to natural gas with a
continuous and reliable supply, thus enabling the Company to meet the
requirement of reducing emissions, while producing significant savings in its
energy costs."
Mr. Yossi Rosen, Chairman of the Board of Oil Refineries: "The
Company's ability to properly identify market demands, along with its
flexibility to leverage its different facilities, as needed and following its
merger, contributed to the positive results in the petrochemicals sector
during the first quarter of this year. In order to leverage potential
synergies, the Company has initiated a number of investments this past
quarter. ORL invested about $45 million for the production of polymers using
existing raw materials already available in the refinery. The expected return
of this investment is estimated at $ 30 million per year. Likewise, the
Company also decided to invest $60 million for expanding the production
capacity of propylene, which is expected to yield a return of about $50
million a year. Since the beginning of 2011, the Company changed its hedging
policy for crude oil prices by reducing the exposure of un-hedged inventory
from 600 thousand tons to 350 thousand tons. Likewise, the Company is
continuing with the construction of the hydrocracker, which is expected to be
operational by mid-2012, and will strengthen the Company's standing as a
leading refiner in the region. Unfortunately, the low dollar exchange rate
impacted ORL, which as an Israeli industrial company, exports much of its
products."
Note: The start of 2011 saw a wave of political instability
and riots in various Middle Eastern countries, including Libya, which is one
of the world's major oil producers. This unrest caused world crude oil prices
to reach a record high In April of this year of over $125 a barrel. While the
riots in Egypt subsided with the change in government, the country is raising
claims, among other things, against the natural gas supply agreement to
Israel. Another event that affected world markets was the earthquake and
tsunami in Japan. This event paralyzed refining capacity by over 1 million
barrels per day and significantly impacted the petrochemical products
production in the region. As noted, this reporting period was marked by a
further increase in crude oil prices reaching its highest levels in March of
this year since the collapse in late 2008. Brent crude oil traded at the end
of the reporting period at a cost of about $116 a barrel.
As accepted by major leading international refiners and
marketers of oil and its products, the results are presented as reported as
well as net of the accounting provision for inventory gains or write offs, in
addition to buying and selling timing and derivative accounting methods under
IFRS. This is in order to enable a common base for comparison of the
Company's ongoing operations.
FIRST QUARTER 2011 ($ millions)
Operating Profit EBITDA
Q1/11 Q1/10 Q1/11 Q1/10
Refining Segment 4 (1) 16 9
Adjusted
Trade Segment (7) (3) (7) (3)
Petrochemicals 29 5 40 17
Segment - Polymers
Petrochemicals 4 8 6 10
Segment - Aromatics
Petrochemicals 3 3 3 3
Segment - Lube-Oils
Quantity refined declined in the first quarter of 2011 by
about 71 thousand tons, compared with the same period last year. In the
fourth quarter of 2010, the Company shut down some its facilities in order to
carry out periodic maintenance and the Company went back to full production
during the first quarter of 2011. The utilization rate in Q1 2011 stood at
86%, compared with approximately 89% in the same quarter last year. Quantity
refined in Q1 2011 totaled 2,062 thousand tons, compared with 2,133 thousand
tons in the same quarter in the previous year.
Adjusted refining margin in Q1 2011 totaled USD/bbl 3.9, compared
with the average Mediterranean Ural Cracking Margin quoted by Reuters of
USD/bbl 0.5. Adjusted refining margin for the first quarter of 2010 totaled
USD/bbl 3.2, compared with the average margin of USD/bbl 3.5.
It should be noted that there are differences between the
Company's refining margin and the benchmark margin, including the crude oil
composition (with the Company also refining crude oil types that are not
Urals), the composition and quality of products produced by ORL, and the
difference caused by the fact that the quoted margin takes into account same
day buying and selling, in which there is a time gap in between the purchase
date of raw materials and the sale date of the finished products. So while
comparing the Benchmark margin with the Company's margin may provide some
understanding about the development of the Company's margins, it does not
constitute an accurate measure in evaluate the Company's margins in the short
term.
Adjusted consolidated EBITDA in Q1 2011 totaled $55 million,
compared with $33 million in the same quarter in the previous year.
Financing expenses in the first quarter of 2011 totaled $23
million, compared with $12 million in the same quarter in the previous year.
Consolidated net income for the first quarter of 2011 totaled $6
million, compared with a loss of $4 million in the same quarter in the
previous year.
Key Developments in the First Quarter 2011
- The Company entered into in an agreement on December 12, 2010
with East Mediterranean Gas SAE ("EMG") to supply natural gas to the
Company's plants for a period of 20 years, starting from the first delivery,
as outlined in their agreement. After the close of the reporting period, the
connection to the natural gas pipeline to the Company's facilities was
completed and the Company received the necessary approvals to use natural gas
in its plants. According to EMG's announcement, there occurred, on April 27
and May 2, 2011, an explosion along the gas line leading to, among other
places, Israel. As a result, the gas line, which supplies natural gas to
Israel, was shut down. Following the first injury, supply was resumed on
March 15, 2011. Following the second injury, the gas supply has not yet
resumed to flow to Israel.
- In the time period since the Company completed its connection
to the national natural gas system, the Company acquired, from time to time,
natural gas from other suppliers, in order to enable the Company to initiate
the testing process of the Company's facilities and its connections to the
gas pipeline.
- In order to leverage potential synergies, the Company decided
to invest about $45 million for the production of polymers using existing raw
materials already available in the refinery. The expected return of this
investment is estimated at $ 30 million per year. Likewise, the Company
decided also to invest $60 million for expanding the production capacity of
propylene, which is expected to yield a return of about $50 million a year.
Key Developments following the First Quarter 2011
- The Company's Board of Directors announced the appointment of
Brigadier General (res.) Pinhas Buchris as CEO of the new ORL, replacing
Yashar Ben Mordechai who decided to resign from his post. Mr. Buchris assumed
his post on May 1, 2011 after completing and overlapping period with the
outgoing CEO.
- On Friday, May 20, 2011, Oil Refineries signed an agreement
with "Tethys Sea" Group for the purchase of natural gas totaling about 1.2
BCM. This additional gas agreement was signed in light of the delays in
supply from EMG, and following the Company's completion of connecting its
facilities to the national gas system. This additional supply agreement will
allow the company to quickly switch over to natural gas with a continuous and
reliable supply, thus enabling the Company to meet the requirement of
reducing emissions. For more details on the additional agreement, please see
the reported dated May 23, 2011, which can be found on the Company's website
www.orl.co.il: Investor Relations > Company Releases
Conference Call
The Company will also be hosting a conference call today, May 23,
2011, at 14:00 UK time, 9:00 ET, 6:00 PST and 16:00 Israeli Time.
On the call, management will present a presentation reviewing
the first quarter 2011 highlights and industry trends. The presentation is
available for download from the Company's website www.orl.co.il:
Investor Relations > Financial Reports.
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 number.
US Dial-in Numbers: 1-888-668-9141
UK Dial-in Number: 0-800-917-5108
Israel Dial-in Number: 03-918-0650
International Dial-in Number: +972-3-918-0650
at: 14:00 UK Time, 9:00 ET, 6:00 PT, 16:00 Israel time. A replay
of the call will be available after the call on the Company's website at
www.orl.co.il.
The conference call will be accompanied by a presentation
available for download from the Company's website, www.orl.co.il, under
investor relations on May 23, 2011.
About Oil Refineries Ltd.
Oil Refineries Ltd. (ORL), located in the bay area of the city
of Haifa, operates Israel's largest integrated refining and petrochemical
group. It is one of the leading refineries in the Eastern Mediterranean area
and integrates, on-site, petrochemical businesses. ORL runs sophisticated and
state-of-the-art industrial facilities with a refining capacity of 9.8
million tons of crude oil per year and 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's petrochemical sector produces Polymers (through its ownership of
Carmel Olefins Ltd), Aromatics (through its ownership of Gadiv Petrochemical
Industries Ltd), and Lube-Oils (through its ownership of Haifa Basic Oils
Ltd). The Company's shares are listed on the Tel Aviv Stock Exchange under
the ticker ORL. For additional information please visit www.orl.co.il.
ORL is controlled by the Israel Corporation Ltd. and Israel
Petrochemical Enterprises Ltd., both public companies whose shares are traded
on the Tel Aviv Stock Exchange.
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.
The following table presents selected information of the Group for the
three months period (USD millions)
Refining Trade
Three months ended March 31
2011 2010 2011 2010
Revenue 1,572 1,233 53 67
Inter-company
operations 298 246 -- --
Total sales 1,870 1,479 53 67
Cost of sales 1,830 1,453 59 68
Inter-company
operations 10 11 -- --
Total cost of sales 1,840 1,464 59 68
Gross profit (loss) 30 15 (6) (1)
Selling, general and
administrative
expenses 14 14 1 2
Inter-company
operations -- -- -- --
14 14 1 2
Operating profit
(loss) for segments 16 1 (7) (3)
Amortization of excess
cost arising from
acquisition of
investees
Operating profit
(loss)
Financing expenses,
net
Profit (loss) before
taxes on income
Tax benefit
Profit (loss) for the
Period
Table Continued below
Petrochemicals
Polymers Aromatics Oils
2011 2010 2011 2010 2011 2010
Revenue 302 261 107 127 23 17
Inter-company
operations -- -- 10 11 -- --
Total sales 302 261 117 138 23 17
Cost of sales 107 127 (25) 5 12 3
Inter-company
operations 154 114 132 117 8 11
Total cost of
sales 261 241 107 122 20 14
Gross profit
(loss) 41 20 10 16 3 3
Selling,
general and
administrative
expenses 12 14 6 8 -- --
Inter-company
operations -- 1 -- -- -- --
12 15 6 8 -- --
Operating
profit (loss)
for segments 29 5 4 8 3 3
Amortization
of excess cost
arising from
acquisition of
investees
Operating
profit (loss)
Financing
expenses, net
Profit (loss)
before taxes
on income
Tax benefit
Profit (loss)
for the period
Table Continued Below
Adjustments to
consolidated Consolidated
Three months ended March 31
2011 2010 2011 2010
Revenue -- -- 2,057 1,705
Inter-company
operations (308) (257) -- --
Total sales (308) (257) 2,057 1,705
Cost of sales -- -- 1,983 1,656
Inter-company
operations (304) (253) -- --
Total cost of
sales (304) (253) 1,983 1,656
Gross profit
(loss) (4) (4) 74 49
Selling,
general and
administrative
expenses -- -- 33 38
Inter-company
operations -- (1) -- --
-- (1) 33 38
Operating
profit (loss)
for segments (4) (3) 41 11
Amortization
of excess cost
arising from
acquisition of
investees (7) (15)
Operating
profit (loss) 34 (4)
Financing
expenses, net (23) (12)
Profit (loss)
before taxes
on income 11 (16)
Tax benefit (5) 12
Profit (loss)
for the period 6 (4)
Condensed Consolidated Interim Statement of Financial Position
USD thousands
March 31, March 31, December
2011 2010 31, 2010
(Unaudited) (Audited)
Current assets
Cash and cash equivalents 23,408 21,817 6,704
Deposits 127,112 93,436 126,991
Trade receivables 559,350 437,049 366,227
Other receivables 83,171 103,786 98,241
Financial derivatives 28,279 22,879 27,577
Investments in financial assets at fair
value through comprehensive income 108,655 110,162 106,895
Inventories 1,225,035 1,203,044 1,200,922
Current tax assets 1,553 5,164 1,819
Total current assets 2,156,563 1,997,337 1,935,376
Non-current assets
Investments in equity-accounted investees 16,603 13,785 16,455
Financial assets at fair value through
other comprehensive income (**) 18,079 17,535 17,701
Loan to Haifa Early Pensions Ltd. 72,243 71,302 77,014
Long term loans and debit balances 2,959 3,806 3,501
Financial derivatives 189,184 121,013 192,990
Employee benefit plan assets 7,674 10,462 7,922
Deferred tax assets 327 -- 307
Property, plant and equipment 2,114,863 1,893,458 2,030,414
Deferred costs 12,280 1,360 12,535
Intangible assets 76,140 89,126 78,950
Total non-current assets 2,510,352 2,221,847 2,437,789
Total assets 4,666,915 4,219,184 4,373,165
Condensed Consolidated Interim Statement of Financial Position
USD thousands
March 31, March 31, December 31,
2011 2010 2010
(Unaudited) (Audited)
Current liabilities
Loans and borrowings 790,416 845,259 773,792
Trade payables 786,160 647,342 619,037
Other payables 126,962 140,964 102,099
Current tax liability 24,464 -- 24,278
Financial derivatives 71,057 43,027 63,292
Provisions 9,367 11,514 9,231
Dividend declared -- 75,000 --
Total current liabilities 1,808,426 1,763,106 1,591,729
Non-current liabilities
Bank loans 734,859 324,216 624,468
Debentures (**) 904,929 853,695 872,421
Liabilities for finance lease 9,749 8,858 9,491
Other long-term liabilities -- 14,739 --
Financial derivatives 4,046 1,793 5,195
Employee benefits 70,693 64,358 70,537
Deferred tax liabilities 53,677 126,854 58,579
Total non-current liabilities 1,777,953 1,394,513 1,640,691
Total liabilities 3,586,379 3,157,619 3,232,420
Capital
Share capital 586,390 586,390 586,390
Share premium 100,242 100,242 100,242
Reserves (**) 46,357 40,851 45,516
Retained earnings (**) 347,547 334,082 408,597
Total capital 1,080,536 1,061,565 1,140,745
Total liabilities and capital 4,666,915 4,219,184 4,373,165
Condensed Consolidated Interim Statement of Comprehensive Income
USD thousands
Three months ended Year
ended
Mar 31, 2011 Mar 31, 2010 Dec 31,
2010
(Unaudited) (Audited)
Revenue 2,057,506 1,704,771 6,791,809
Cost of sales, refinery and services 1,981,969 1,663,537 6,561,599
Revaluation of open positions in
derivatives on prices of goods and
margins, net 4,821 4,644 27,179
Total cost of sales 1,986,790 1,668,181 6,588,778
Gross profit 70,716 36,590 203,031
Selling and marketing expenses 21,512 26,127 99,282
General and administrative expenses 14,648 14,668 57,955
Operating profit (loss) 34,556 (4,205) 45,794
Financing income 7,164 29,583 89,330
Financing expenses (30,384) (41,690) (140,439)
Financing expenses, net (23,220) (12,107) (51,109)
Company's share in profits of equity
accounted investees, net of tax 270 179 476
Profit (loss) before taxes on income 11,606 (16,133) (4,839)
Tax benefits (taxes on income) (5,477) 12,546 81,619
Profit (loss) for the period 6,129 (3,587) 76,780
Company Contact:
Rony Solonicof
Chief Economist and Head of Investor Relations
Tel. +972-4-878-8152
Contact IREn@orl.co.il
Investor Relations Contact:
Ehud Helft / Porat Saar
CCG Israel
Tel. (US) +1-646-233-2161 / (Int.) +972-52-776-3687
info@ccgisrael.com
.
Tags: Haifa, Israel, May 23, Oil Refineries Ltd
