Taqa swings to Q3 loss on low gas prices
Abu Dhabi, November 14, 2012
State-owned Abu Dhabi National Energy Company (Taqa) has announced plans to cut its spending in North America by 30 per cent in 2013 after swunging to a third-quarter loss, hurt by increased costs and lower natural gas prices, which offset a rise in revenue.
Taqa, which is 75-per cent owned by the Abu Dhabi government, said its net profit for the third quarter fell to Dh288 million ($78.4 million) from a net profit of Dh537 million last year.
In a swift move, CEO Carl Sheldon said Taqa had decided to cut its 2013 capital expenditure in Canada and the US to $500 million from the planned $750 million to weather a downturn in commodity prices.
Though its North American spend will be cut, overall capital expenditure will remain unchanged at about $2.2 billion to $2.3 billion, Sheldon added.
The Abu Dhabi company said the Q3 results were impacted by the construction costs of Dh2.73 billion which the company booked for the Jorf Lasfar power plant in Morocco.
Revenue rose 43 per cent to Dh8.83 billion during the quarter from Dh6.2 billion a year ago. Taqa's oil and gas revenues fell to Dh2.56 billion from Dh2.74 billion a year ago, while fuel revenue decreased to Dh952 million from Dh1.15 billion in the prior year period.
The loss was principally driven by lower production and revenues in our oil and gas business, due to weaker North American gas prices, said the Abu Dhabi energy firm in a statement.
Taqa pointed out that the global economy continued to be volatile in the third quarter, particularly with respect to commodity prices. Both Brent and WTI crude oil saw softening compared with the same period last year and North American natural gas prices were 40 per cent lower, though some improvement has been seen post period.
The company's total revenues for the nine-month period surged 10 per cent higher year-on-year to hit Dh20.6 billion, compared to the total revenues of Dh18.7 billion last year, largely due to higher power and construction revenues, offset by lower supplemental fuel revenues and oil and gas revenues.
However, Taqa said the total oil and gas revenues (including gas storage and other income) decreased from Dh9 billion to Dh8.8 billion during the nine-month period. Much of this decline was due to a weakening of commodity pricing in the third quarter and particularly weak natural gas prices in North America, which declined by 37 per cent year-on-year.
As a consequence, Taqa has disposed of non-core assets to consolidate its footprint and shut-in uneconomic wells, leading to lower production in North America.
The Abu Dhabi energy giant said the company's nine month results demonstrated the resilience of its global portfolio with a strong performance from power & water helping to ease the effect of weaker commodity prices – particularly in North America.
The power & water delivered a solid operational performance, with forced outage rates at Shuweihat 2 and Jorf Lasfar, in particular, well below best in class worldwide standards, while oil & gas had mixed results, with a solid performance from the UK and Dutch entities, although North America continued to show weak results, it added.
Commenting on the results, Sheldon said, "We have had a strong performance from across our power businesses, with over 95 per cent availability from our domestic fleet a testament to their operational excellence. Similarly, in the UK North Sea, we have seen a good performance at Brae and Tern help to offset an unexpected shutdown at North Cormorant and weather delays at Pelican."
"The resilience of our global portfolio has helped to ease the effect of the weaker commodity price environment – particularly in North America, where natural gas prices have nearly halved over the last year, requiring us to make some tough choices on shutting-in uneconomic production and cutting capital expenditures related to dry natural gas," he remarked.
“We continue to make good progress on our strategic goal of building out our operational footprint in Mena and our recent agreement with the Turkish Government, and our proposed power project in the Kingdom of Saudi Arabia, reiterate the strength of our passport to do business in the region,” said Sheldon.
Looking forward, Taqa said it was well positioned for growth, with the following post-period developments:
•In October, the Government of the Republic of Turkey and the Government of the Emirate of Abu Dhabi signed a joint declaration regarding investment in power generation and mining in southern Turkey.
•In Saudi Arabia, Taqa, along with consortium partners, submitted the lowest tariff proposal for the development of the 2,000 MW Rabigh 2 plant.
•Taqa announced the discovery of a new oil accumulation in the UK Northern North Sea Contender Block that is expected to correspond to 10-30 million barrels of oil in place.
In his comments, Chief financial officer Stephen Kersley said, "Our financial performance over the last quarter has been impacted by a series of one-off items – both cash and non-cash, which have suppressed our net result."
"We have taken pragmatic action to address the impact of weaker commodity prices and will continue to monitor North American gas prices particularly closely in the context of capital plans for 2013. That notwithstanding, we have strong liquidity which we continue to manage prudently,” he noted.
In terms of liquidity, Taqa is well positioned for the future, with approximately Dh18 billion in cash and unused credit facilities at the end of the third quarter, stated Kersley.
The Abu Dhabi firm had recently launched syndication of the refinancing of its $2 billion revolving credit, which has been well received in the market, he added.-Reuters and TradeArabia News Service