Petrom

As topic introduction for a discussion on agf.ro, I collected some facts about Petrom. Just not to search for the numbers during the discussions, to support the different oppinions :)

- the price paid by OMV for takeover was 0,2158. Also the 8% shares distributed to employees will be also sold at this price.
- the last dividend was 0,0191 (roughly, 10% of the current price)
- EPS after 9m: 0,04 ron (roughly, 20% of the current price)
- Erste's target price for SNP (published in nov 2008) is 0,6 ron
- the well known profit structure of Petrom: exploration brings profit, refining and marketing are loosing money. Discussion topic: when or what can move refining and marketing to profit?

About Exploration

- q3 domestic production cost 45 ron/boe. I would say this would stabilize for the moment.
- q3 realized crude price 247 ron/boe. The crude price is falling, but usd is jumping. I would rate that by the end of the year, the realized crude price will fall to 150 ron/boe.
- according to 2007 annual report, the domestic replacement rate is 38%.
- according to 2007 annual report, domestic and international production is approximately 197,000 boe/d and proved reserves are around 894 mn boe. Discussion topic: reserves trend.
- the new Komsomolskoe Kazakhstan oil field is expected to produce about 2800 boe/day. Now, the whole Petrom production is arround 197.000 boe/day

Of course, Petrom's profit is highly dependent from the international oil price and the exchange rate usd/ron. Until marketing division will deliver results.

About marketing & refining

- dominant market share in Romania
- refining margin in q3 was almost 0

The one time events impacting the 2008 financials:

- provisions were created for the employee claims (diminishing profit in q2)

- Petrom hedges the crude price (selling in advance at higher prices) and this is visible in q3 in the financial result (raising profit in q3)
(quote from report: Should oil prices drop below USD 65/bbl in 2009, the hedge would still pay out an additional USD 15/bbl to actual oil prices. The put spreads were financed via calls in order to avoid initial investment (zero cost structure), whereby Petrom will not be able to profit from oil prices above approximately USD 110/bbl in 2009 for the above stated volume)


- Arpechim was written off in q3. What's next? Sell? Close? Company executives stated clear that they do not expect the unit to be profitable.

- future investment: 860 MW Brazi power plant. Is Petrom moving to power generation market?

Personal oppinion: as long as it trades under the takeover price (0.21 ron), SNP is a buy. However, it is a defensive share and not very interesting for the kind of traders staying daily on agf.ro

I would wish Petrom to be some kind of indicator for the whole romanian economy. Similar to General Electric. If GE goes well, the whole US economy goes well. If not, than not :)