PetroSA’ S FINANCIAL POSITION REMAINS STRONG DESPITE NET LOSS FOR 2009/10 FINANCIAL YEAR
PetroSA, South Africa’s national oil company, announced its annual results for the 2009/10 financial year, which recorded a R356 million net loss, compared to a R1, 9 billion net profit in the 2008/09 period.
Despite the loss, PetroSA has however advanced that its financial position remains strong. The net loss was mainly attributable to declining gas production, the reduced international oil prices ($69 vs. $84 per barrel in 2008/9) and the statutory maintenance shutdown of PetroSA’s Mossel Bay refinery during 2009.
The global economic recession also played a role in PetroSA’s financial performance in the period under review. The recession triggered a slowdown in demand for diesel and petroleum products. The statutory shutdown saw PetroSA importing diesel and petrol, in order to meet industry supply commitments.
PetroSA experienced a 33% decrease in revenue to R8 billion, from the previous year’s R12 billion. No dividends were declared in the 2009/10 financial year. A major cost in the 2009/10 year included a R500 million expenditure on exploration in Equatorial Guinea, which is yet to yield commercially exploitable hydrocarbons.
Significant progress was achieved on various fronts, including work on Project Mthombo, where a feasibility study for the proposed 360 000 barrels per day refinery, were successfully completed.
In the year under review, the national oil company spent a R1, 26 billion on preferential Black Economic Empowerment (BEE) procurement, representing 48.8% of the total expenditure bill of R2, 58 billion. The Liquid Fuels Charter requires a 25% BEE participation across the value chain.
Dr Nompumelelo Siswana, PetroSA’s Acting CEO and President, said the company was confident that demand for diesel and petrol would soon return to an upward growth trend.
“The company-wide commitment for operational effectiveness will help PetroSA wade through the era the organisation has now entered. This is an era afflicting the industry at large, during which the cost of doing business is increasing as it becomes more costly to extract the additional barrel or cubic metre of hydrocarbons,” she said.
“For PetroSA, the key cost driver remains the cost of refinery feedstock, while the need to ensure the reduction of harmful emissions is also critical,” Dr Siswana added.
In the 2008/09 annual report PetroSA announced plans focused on sustaining the Mossel Bay Gas-To-Liquids (GTL) refinery that included an LNG import project. Over the period PetroSA was engaged in negotiations with potential LNG suppliers. Due to the high prices that rendered the option non-commercial, PetroSA earlier in the year, put on hold efforts to import LNG, while alternative gas supplies are investigated. Should conditions change and the price become reasonable, LNG, as an option, will be re-evaluated.
For now PetroSA is focussing on exploiting indigenous gas resources to address feedstock challenges at the Mossel Bay refinery. A domestic offshore drilling campaign, Project Jabulani, to appraise discovered gas accumulations has resulted in a decision to commence with field development studies on the F-O gas field. The reserve recovery from the F-O gas field, which is situated 40 km’s south-east of PetroSA’s FA production platform, is estimated at +-200 Billion cubic feet (Bcf).
The F-O gas field offers an opportunity to extend the GTL refinery’s productive life by up to eight years. Production of the gas field is targeted for 2013.Nkosemntu Nika, PetroSA’s Chief Financial Officer, said in the short-to-medium term, the sustainability of the Mossel Bay GTL refinery remained a major challenge. He was however confident that the company’s financial performance would improve.
“The outlook for the new financial year remains positive despite the significant losses recorded in the year under review. The economy is recovering from the recession and this is expected to positively impact on the organisation going forward,” Mr Nika said.
“The corporate balance sheet remains strong but requires improvement by acquiring assets for further diversification of income streams,” he added.
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