Oil Refineries Announces Results for First Quarter 2011

By Oil Refineries Ltd, PRNE
Sunday, 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

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