Petroplus Holdings AG today reported a second consecutive loss in the three months ended December 31st 2008, due to the global economic downturn and a decrease in demand for oil products.
The refining firm reported a net loss of $774.9 million for the three months ended December 31st 2008 compared with a profit of $136.9 million the previous year, and a net loss of $495.1 million for the year versus a $303.3 million profit in 2007.
Commenting on the results,
Thomas D. O’Malley, Petroplus’s Chairman of the Board of Directors, said, “2008 presented a very challenging year for the refining industry, with record pricing and extreme volatility in oil markets, and the start of the overall decline in the global economic environment. Despite these challenges, we earned $9.02 clean earnings per share. We successfully acquired and integrated the French refineries, which turned out to be great purchases both operationally and economically. We also continued to enhance our capital structure and we maintained and continue to maintain a healthy level of liquidity.”
Speaking about the company’s liquidity position and capital structure,
Karyn F. Ovelmen, Petroplus’s Chief Financial Officer, said, “The company continues to have strong short-term liquidity to support the operational needs of the Company and provide for additional cash borrowings as necessary. Even with the volatility in the crude oil price, the company maintained a very comfortable level of excess collateral throughout 2008, and ended the year with approximately $700 million in available credit under our working capital facility.
"With regards to the longer-term capital structure, in-line with our disciplined capital strategy, further enhancements were made during 2008 with the successful execution of the $500 million convertible bonds in March. Our current capital structure provides for an ample level of short-term liquidity and flexibility heading into what will most likely be an even more challenging year in 2009.”
Regarding cash flows and the balance sheet, Ms. Ovelmen said, “During 2008, the company generated over $600 million in free cash flows, excluding changes in working capital. This allowed the company to partially fund the acquisitions of the French refineries and the 2008 dividend payment with cash generated during the year. We ended the year in a net cash borrowing position of approximately $40 million. The decline in the net cash position from September 30 to December 31 includes: the impact from the pre-payment of excise duty taxes in Germany required in December each year, the expiration of the receivables factoring agreement in the fourth quarter and timing of crude cargo purchases quarter over quarter. The net debt-to-net capitalization ratio at December 31 was 46 percent (excluding the 2008 FIFO impact, the net debt-to-net capitalization ratio would be 35 percent).”
Regarding the outlook for the refining market over the next year or so, Mr. O’Malley stated, “Refining margins are expected to be lower in 2009 and 2010 than the average of the period 2004 through 2008. New refining capacity coming on-line in the next few years, which was intended to reduce some of the tightness that had existed in the oil refining market since 2004, will instead be coming on-line in a market where world oil product demand is expected to decline. We expect gasoline to be under the greatest downward pressure during this period. The middle distillate crack spread has maintained its strength, but depending on the length and severity of the global recession, it could come under pressure. Europe’s diesel deficit coupled with lower global utilization rates should provide some support for middle distillate cracks. With our production focus on the middle of the barrel, our current capital structure, and very experienced management team, the Company is positioned to operate through a period of lower refining margins.”
Commenting on a 2009 dividend, Mr. O’Malley, said, “The Board of Directors intends to propose to shareholders for resolution, at the Annual General Meeting in May 2009, a reduction in the dividend from the prior year of CHF 1 per share to CHF 0.60 per share based on a limitation in our long term debt agreements, which limits payments at this time to $50 million. This was triggered by the reduction in the crude oil and oil products values. The dividend will be affected through a reduction of the nominal share value.”
Robert J. Lavinia, Petroplus’s Chief Executive Officer, commented, “During the past year our refinery operations have been impacted by unplanned downtime and disruptions. Operationally, we need to do better at maintaining the reliability of our sites. We have established programs across our refining system to improve and enhance key areas such as reliability, safety, environmental, and energy efficiency. We have enhanced operating procedures, implemented robust equipment inspection programs, and improved our equipment and unit startup procedures.
"All inspection and maintenance programs are being enhanced across our refining system. All of these programs will have short term improvements but the full benefit will be seen as the refineries become further integrated into the Company. We intend to improve our operational track record throughout the year. The company’s main priorities have been and will continue to be, safety and reliability.”
With regards to the Teesside refinery, Mr. Lavinia, said, “The Board of Directors has reviewed the refinery operations and based on required future capital investments at the site, the Company will evaluate strategic alternatives, including the potential sale or conversion to a terminal or storage facility. During the evaluation process, the Company will continue to operate the refinery and make the necessary investments for compliance with environmental, health and safety standards. The Company is committed to a smooth transition process and consideration for the welfare of employees and the supply of oil products into the community.”
Throughput rates by refinery for the first quarter and full year 2009, including intermediate feedstocks, should average approximately as follows: Coryton at 170,000 to 180,000 bpd for the first quarter and 175,000 to 185,000 for the year; Ingolstadt at 75,000 to 85,000 bpd for the first quarter and 95,000 to 105,000 for the year; BRC at 85,000 to 95,000 bpd for the first quarter and 95,000 to 105,000 bpd for the year; Cressier at 50,000 to 60,000 bpd for the first quarter and 45,000 to 55,000 bpd for the year; Petit Couronne at 105,000 to 115,000 bpd for the first quarter and 120,000 to 130,000 for the year; Reichstett at 60,000 to 65,000 bpd for the first quarter and 65,000 to 75,000 for the year; and Teesside at 40,000 to 50,000 bpd for the first quarter. Teesside full year throughput is dependent upon the economic environment, Petroplus said.
