The Abu Dhabi National Energy Company, TAQA,  has today reported surging profits for the second quarter of 2011 after a dismal Q1 following a tax grab by the UK Treasury on North Sea oil profits.
The company, listed on the Abu Dhabi Securities Exchange since being spun off from the Abu Dhabi government in 2005, supplies Abu Dhabi with 98% of its power and water, and has diverse assets in the upstream Oil & Gas industry in North America, the UK and the Netherlands.
Oil & Gas revenues of AED 3.125 billion ($850 million) are up 53% on Q2 2010, This 54% increase versus the same period last year was primarily driven by the increase in crude oil prices, plus a 27% increase in UK North Sea production. The firm continues its drilling program at its Tern platform, and saw its Falcon platform come onstream post-quarter on 15 July.
TAQA General Manager Carl Sheldon said that “from this set of results we are talking about now, what happens in a positive price environment”, but that TAQA has planned it’s investment programs against very conservative price assumptions and investments remain “robust” against these assumptions. “We are not expecting to be affected by prices we have not planned against,” he said. Sheldon confirmed that the company is $920 million through a $2 billion capital expenditure program this year.
Sheldon revealed that Taqa’s average production for the quarter was 136,000 barrels of oil per day, which is within the company’s range estimate of 135,000 – 146,000 bpd for the year. He expects an “uptick” in production in the second half of the years as the Falcon rig in the North Sea “settles down to 6,000 bpd of new production” and delayed work in Canada proceeds following weather delays.
Cost of sales increased 25% from AED 3.7 billion ($1 billion) to AED 4.6 billion ($1.252 billion). Within this, fuel expenses increased in line with supplemental fuel revenues. Operating expenses increased by 27%, while depreciation, depletion and amortisation increased 21% reflecting TAQA’s increased asset base.
Profit before Tax was AED 1.4 billion ($381 million), 151% higher year-on-year, due to higher revenues as a result of the oil price, plus tight control over operating expenses.
Total debt and net debt increased year-on-year due to the transfer of interests at Fujairah 2 and Shuweihat 2. However, TAQA’s Net Debt/Capital ratio decreased to 79%. Net Debt/EBITDA reduced to 4.9 times for Q2 2011, versus 5.7 times at the end of Q2 2010.
In a conference call Sheldon emphasised that TAQA has “good liquidity and a good cash position”, with AED 4 billion ($1.089 billion) in cash and cash equivalents. Speaking to Oil & Gas Middle East company CFO Stephen Kersley said the comapny is “making progress” on reducing its debt. “Over the last five quarters our EBITDA to interest has move from 2.6 to 3.4, up against a target of 4.5 to get a standalone investment-grade credit rating. Our net debt to EBITDA/equity has moved down from 5.9 to 4.7 against a target of 4.”
“Our plans to pay down debt are robust against oil prices,” explained Kersley. “Moving to a standalone investment-grade rating is an important objective of the company, and we are confident we will reach this in the medium term.”
