Brightoil Petroleum (Holdings) Ltd has announced that profit attributable to shareholders fell by 23 percent to HK$331.1 million during the six months ended 23rd December 2010.
Gross profit increased by 17 percent to HK$793.4 million and total revenue rose 109 percent to HK$12.51 Basic earnings per share and diluted earnings per share were HK4.94 cents and HK4.13 cents respectively. No dividend is proposed for the period under review.
Commenting on the results,
Dr. Sit Kwong Lam, Chairman and CEO of the group, said, “2011 is a crucial year for Brightoil Petroleum as we adopted an enhanced business model to fortify our future development. We are not only expanding our global network and the scale of our international supply and bunkering business to provide a steady growth for the company, but also putting more effort to develop our upstream business in order to excel to a global energy production and supply company. In the mean time, downstream operations will form a solid foundation, which will allow us to pursue upstream opportunities. Our first upstream project is targeted to commence production within a year. It marks a significant step forward to our vision to become one of the leading global energy conglomerates.”
"During the period, our ISB operation expanded into a voluminous scale, therefore it is necessary for the Group to lock in its profit for transactions, which are committed but not yet completed, or inventories through hedging swap, so as to mitigate price risk of oil price fluctuation. Due to the accounting policy, the group reported a decrease in fair value change of derivative financial instruments of approximately HK$218.5 million. In January, an approximately HK$133 million was realized upon settlement. Meanwhile, there are some outstanding contracts remain on the book and the value will be realized upon settlement," Brightoil said.
As at 31 December 2011, total cash on hand was approximately HK$2.12 billion. Net asset value per share increased to HK$0.79.
During the period, the group purchased five newbuild 318,000 dwt Very Large Crude Carriers (VLCCs). As part of its strategy to support the growth of its bunkering activities, the group increased inventory levels from HK$660 million as at 30 June 2010 to HK$3.3 billion.
International Supply and Bunkering (ISB)
During the period under review, Brightoil said ISB remained the major driver for the company. Sales volumes for the ISB segment surged 100 percent to 3.4 million tonnes from 1.7 million tonnes last year.
The group carried out marine bunkering operations in major ports, including Shenzhen, Shanghai, Ningbo, Zhoushan, Singapore, Hong Kong, ARA region and Malaysia.
The growth in marine bunkering demand as well as the contribution from its oil trading business, which began operating last November, led to the rise in total sale volumes during the period. Total revenue amounted to HK$12,477.9 million, in which 70 percent came from marine bunkering and 30 percent from trading of petroleum products.
"As the group sets forth a strategic plan, we have been focusing on global network mapping amongst the world’s major ports for our ISB operation. We are also relentlessly seeking opportunities to lease storage and terminal facilities from local operators, or to form strategic partnerships with storage owners, or construct our own facilities. By leveraging on our well established infrastructure, supplier and customer network, the new trading business has been developed on an extensive scale, expanding the existing trading business from trading purely fuel oil to a full array of petroleum products," Brightoil said.
Commenting on its plans for the future Brightoil confirmed that it was also in the process of opening offices in London and Geneva to 'reinforce its trading scope'. The group already has offices in Singapore and Houston.
Oil Storage & Terminal
Dredging and reclamation works for phase 1 of its oil storage and terminal facilities in Dalian and Zhoushan were launched in June and July 2010 respectively. Construction work for the main facilities, including terminals, oil tanks, pipelines, roads etc., of both projects are expected to begin in mid-2011.
In addition to using the new facilities as logistical hubs to support its bunkering operation, Brightoil said it also plans to lease part of the storage facilities to third parties to generate stable income in the future.
Marine Transportation
During the six months under review, the group took delivery of two 115,000 dwt ocean-going oil tankers (Aframax), furthering its oil-carrying capacity to about 450,000 tonnes. Currently, Brightoil has four Aframaxes in operation which are mainly utilized for transporting fuel oil or crude oil internationally.
From November 2009 to August 2010, taking advantage of the cyclic economy of shipping sector, the group purchased 9 ocean-going oil tankers with sizes ranging from 107,500 dwt to 318,000 dwt in order to support its ISB operation and also to provide marine transportation services to third parties to generate additional freight income.
During the six-month period, marine transportation contributed an income of HK$26.9 million to the group. The five 318,000 dwt VLCCs ordered by the group in August 2010 are under construction, and are expected to be delivered between July 2012 and March 2013. Upon the delivery, the total capacity of Brightoil's marine fleet will rise to 2 million tonnes.
Upstream Business
Technical studies for the Overall Development Plan (ODP) in regard to Brightoil's Tuzi natural gas project were initiated in January 2010 and the first draft was completed at the end of December 2010. The ODP has been submitted to China National Petroleum Corporation for review and approval. The process is expected to take six months.
Brightoil said it is building a new upstream business at its Singapore office, which is expected to begin operating in the second half of the year.
Looking forward, Dr. Sit concluded, “With the aspiration to develop a fully integrated supply chain in the downstream oil industry, Brightoil Petroleum also strives to develop each of the core businesses into an independent profit center, providing a solid foundation and diversified revenue streams for its future growth. For the long-term development and greater upside potential of the group, we will continue to pursue opportunities to broaden the appeal of our upstream operations in the oil and gas sector, with a view to provide greater value and higher returns to our shareholders.”
