Petroplus Holdings AG today reported an estimated clean net income of $135 million, or $2.00 per share for the third quarter of 2008, after subtracting the estimated net loss derived from a declining price environment.
For the nine months ended September 30, 2008, Petroplus reported an estimated clean net income of $440 million, or $6.40 per share, after subtracting the estimated net loss derived from a declining price environment and other one time items.
On an International Financial Reporting Standards ("IFRS") basis, Petroplus reported a loss of $(445.6) million, or $(6.49) per share, for the three months ended September 30, 2008 and net income of $279.8 or $4.07 per share, for the nine months ended September 30, 2008.
Included in the IFRS net loss of $446 million for the three months ended September 30, 2008 is approximately $(645) million or $(9.39) per share pre-tax loss related to the impact of using the FIFO methodology versus using the estimated LIFO methodology. The loss of $645 million includes approximately $495 million related to third quarter earnings and approximately $150 million related to the fourth quarter. In accordance with IFRS an additional $150 million was recorded to reflect the rapid decline in crude oil pricing and the selling price of oil products and its impact on the valuation of crude oil and oil products inventory on hand at September 30. IFRS requires the cost of inventory to be reduced to its net realizable value if its selling price has declined.
Commenting on the balance sheet at quarter end,
Karyn F. Ovelmen, Petroplus's Chief Financial Officer, said, "We ended the quarter in a solid financial position, even after taking into consideration the rapid declining crude oil price environment. In the short term, the decline in the crude oil prices has a negative impact on our cash flows due to the time lag from when the crude oil is purchased to when the products produced from that crude oil are ultimately sold. However this was offset by the reduction in working capital burden due to the lower crude oil prices coupled with the strong third quarter Dated Brent product cracks. We ended the third quarter with close to $800 million in cash and a net debt-to-net capitalization ratio at September 30 of 23 percent."
Regarding the capital structure, Ms. Ovelmen said, "We had no short-term borrowings and over $1.2 billion of available credit under our working capital facility at September 30. Our $3.5 billion working capital facility is provided by a pool of 14 banks, including some of the strongest European names, and is comprised of both committed and uncommitted lines that allow for these rapid rises and declines in crude oil prices that we have and continue to experience in this market. Our earliest long-term debt maturity is 2013."
Commenting on the third quarter results,
Thomas D. O'Malley, Petroplus's Chairman of the Board of Directors, said, "As I stated in connection with the second quarter earnings, the IFRS profit number will vary with the volatility in the global crude oil prices. Consistent with the second quarter, the underlying estimated clean earnings during the third quarter of $2.00 per share and $6.40 per share for the first nine months of the year reflect our refinery operations and the Northwest European refining margin environment in which we operate, excluding the loss from the declining price environment. During the third quarter, we benefited from both the continued strength in middle distillate pricing as well as a stronger fuel oil crack as compared to the second quarter."
Looking forward, Mr. O'Malley, stated that, "Although the fourth quarter refining margin cracks have come down as compared to the third quarter, our realization of the cracks is greater due to the lower crude price. Crude pricing has decreased almost 60% from its peak pricing in June of this year. In a lower crude price environment our cost of fuel consumed in-production is lower. We have experienced additional FIFO losses in the fourth quarter however our clean earnings are benefiting from the lower crude price environment and better refinery operations."
Mr. O'Malley stated further, "The unprecedented drop in commodity prices seen in the third quarter would appear to be an over-correction. The company will model 2009 based on a crude oil price of $80 per barrel and we believe OPEC reductions and slower growth in non-OPEC oil production will under pin the market to this level."
Concerning refinery operations,
Robert J. Lavinia, Petroplus's Chief Executive Officer, said, "The results for the third quarter were limited by both planned and unplanned downtime. The planned Teesside refinery maintenance was completed in July, on schedule and on budget. We had unplanned downtime at both the BRC and Coryton refineries. BRC was limited for the first two months of the quarter as a result of the June 9th fire in the visbreaker. In September and continuing through today, the BRC refinery is running at optimal run rates. In July, the Coryton refinery experienced a power disruption and all refinery units were safely shut down. All units were subsequently restarted with the exception of the Fluid Catalytic Cracker (FCC) and associated units. The FCC was restarted at the end of August and the refinery ran at planned rates through September. Unfortunately, on October 23rd the Coryton refinery experienced another power disruption and again for safety purposes, all refinery units were shut down. All units have subsequently been restarted."
Petroplus Holdings AG is the largest independent refiner and wholesaler of petroleum products in Europe. The company focuses on refining and currently owns and operates seven refineries across Europe.
Throughput rates by refinery for the fourth quarter and full year 2008, including intermediate feedstocks, should average approximately as follows: Coryton at 170,000 to 180,000 barrels per day (bpd) for the fourth quarter and 170,000 to 180,000 for the year; Ingolstadt at 100,000 to 105,000 bpd for the fourth quarter and 95,000 to 105,000 for the year; BRC at 100,000 to 110,000 bpd for the fourth quarter and 80,000 to 90,000 bpd for the year; Cressier at 50,000 to 55,000 bpd for the fourth quarter and 55,000 to 60,000 bpd for the year; Teesside at 30,000 to 40,000 bpd for the fourth quarter and 60,000 to 70,000 bpd for the year; Petit Couronne at 115,000 to 125,000 bpd for the fourth quarter and 115,000 to 125,000 for the year; and Reichstett at 65,000 to 75,000 bpd for the fourth quarter and 65,000 to 75,000 for the year.
Throughput rates by refinery for the full year of 2009, including intermediate feedstocks, should average approximately as follows: Coryton at 175,000 to 185,000 for the year; Ingolstadt at 95,000 to 105,000 for the year; BRC at 95,000 to 105,000 for the year; Cressier at 45,000 to 55,000 for the year; Teesside at 85,000 to 95,000 for the year; Petit Couronne at 120,000 to 130,000 for the year; and Reichstett at 65,000 to 75,000 for the year.
As a leading refiner, Petroplus plays a pivotal role in the availability of marine fuels in a number of key bunker ports across northern Europe.
The refineries have a combined throughput capacity of approximately 864,000 bpd.
