Oil Refineries Announces Results for First Quarter 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.
HAIFA, Israel, May 23, 2011 /PRNewswire/ -- 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 http://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 http://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 http://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 http://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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