Summary
TAQA benefitted from an increase in commodity prices which resulted in a 38% year on year increase in Upstream and Midstream revenues in the quarter. This solid performance was supported by stable revenues in the Power & Water business. Combined with flat cost of sales, this resulted in a significant increase in net profit after minority interests.
Comment
Carl Sheldon, General Manager of TAQA, said: “We have seen a marked improvement in revenues and profit for the first quarter of 2010, as our Upstream operations have benefited from the recovery in commodity prices. At the same time, our Power & Water business has continued to deliver stable revenues and cash flow and has operated at a high level of technical availability.
Operationally, during the first quarter of 2010, we have continued to focus on the optimisation of our assets, particularly in TAQA NORTH where we have conducted a well by well review, as well as drilling three new wells in the Horn River Basin.
We continue to make excellent progress with our organic growth projects, including signing an MOU with the Ghanaian Government for the expansion of Takoradi, and selecting a preferred EPC bidder for the expansion of Jorf Lasfar in Morocco.
Following the close of the quarter, we have welcomed H.E. Abdulla Saif Al-Nuaimi to the team with his appointment as Chief Executive Officer. His experience, both as a Board member of TAQA and in his other roles for major Abu Dhabi based companies, will be a tremendous asset to TAQA and our shareholders.”
Abdulla Saif Al-Nuaimi, CEO & MD of TAQA, said: “We can see the inherent robustness of TAQA’s model coming through in this quarter’s performance, as our Upstream business was able to capture the rebound in global commodity prices to add to the solid foundation of our Power & Water businesses. I am looking forward to working closely with Carl and the team to create further value for the benefit of all our stakeholders.”
Financial Summary
Three month revenues from the sale of electricity and water were AED 1.5 billion, a 6% increase compared with AED 1.4 billion in Q1 2009. The increase was primarily due to the expansion of Taweelah A1 which was commissioned in June 2009.
Oil and gas revenues in Q1 2010 were AED 2.2 billion, an increase of AED 0.6 billion compared to AED 1.6 billion in Q1 2009. This 39% increase was driven primarily by the increase in commodity prices, revenue from the DSM assets acquired in October 2009 and by strengthening of CAD and EUR against AED.
The large increase in net profit and basic earnings per share can be primarily attributed to the improvement in commodity prices.
During the quarter TAQA also made headway in reducing its net debt to capital position which has been reduced to 80% from 85% in the same quarter of 2009.
Total revenues from Power & Water increased by 6%, to AED 1.5 billion, reflecting the greater power generation capacity of the domestic portfolio.
During Q1 2010 the domestic power plants operated at an average of 86.8% technical availability, while TAQA’s international plants recorded 97.2% availability giving an overall average of 88.8% across the group.
In addition, TAQA continued to make progress on value-enhancing projects. During the quarter, the Company has completed the tender for the EPC contractor for the Jorf Lasfar plant expansion and selected a preferred bidder. The project expansion of 700 MW remains on track for commissioning in 2013 and 2014.
In Ghana, TAQA signed a Memorandum of Understanding with the Government of Ghana in relation to a proposed 100 MW expansion of the Takoradi plant.
Upstream and Midstream revenues increased 38% compared to Q1 2009, largely reflecting the improvement in crude oil and natural gas prices, plus additional capacity from the DSM assets acquired in late 2009, and favourable currency movements.
TAQA NORTH focussed on asset optimisation during Q1 2010, with well-by-well property reviews yielding previously unrecognised opportunities in the form of high return, quick to execute, small scale projects. In addition, TAQA NORTH experienced historically high reliability due to preventative maintenance, better operating procedures and a relatively mild winter. This led to a production efficiency of 97% versus 93% last year.
Three Horn River Basin wells were successfully drilled with two tested before the end of the winter drilling season. Preliminary results are promising and complete results are expected in mid-2010.
TAQA Energy’s production was boosted year on year due to the acquisition of DSM Energy. Well workover candidates are being evaluated with the aim to offset natural declines in production.
In terms of gas storage, the cold winter in Europe resulted in increased usage of European gas storage facilities and PGI Alkmaar performed well, producing two-thirds of its capacity.
Bergermeer Gas Storage has achieved a key milestone, with the Netherlands Ministry of Economic Affairs issuing a State Permitting Plan, taking the project to the final stage in the permitting process. Engineering work is on schedule and pipeline engineering is ahead of schedule.
TAQA Bratani found success with its North Sea drilling program in making an oil discovery north-east of its Tern field. The exploration well was drilled in Block 210/25 of production license P296, approximately eight kilometres north-east of the TAQA Bratani operated Tern Alpha platform. Development planning is underway to bring this well on production. The field could potentially be developed as a single-well subsea tieback to the Tern Alpha platform.
Key corporate developments
Q1 2010
On 4th March, Moody’s Investors Services downgraded TAQA’s corporate credit rating from Aa2 to A3 (stable). This was as a result of a change in Moody’s ratings criteria that apply to government related issuers as a whole. All Abu Dhabi government related issuers were downgraded. The support for TAQA from the Government of Abu Dhabi remains unchanged. As the Government stated in their press release following the Moody’s announcement, TAQA "plays an important role in the Emirate's energy policy."
Post period developments
At TAQA’s Annual General Meeting on 20th April, TAQA’s shareholders approved a dividend of 10 fils per share to be paid on 19 May 2010.
On 28 April 2010, TAQA announced it has further strengthened its leadership team with the appointment of H.E. Abdulla Saif Al-Nuaimi as Chief Executive Officer, retaining a role on the TAQA Board of Directors.
