PetroSA BUSINESS BEGINS TO STABILISE DESPITE TURBULENT 2015/16 FINANCIAL YEAR PERFORMANCE
CAPE TOWN, 18 November 2016 –The Petroleum, Oil and Gas Corporation of South
Africa (SOC) Ltd., PetroSA, has clawed back from a dismal financial showing, recording
a R449 million net loss for 2015/16 Financial Year (FY), a credible improvement
from the R14, 6 billion loss for 2014/15.
Gross revenue decreased by 13% to
R15, 7 billion (2015: R18 billion), total assets increased to R20, 9 billion
(2015: R19, 8billion) and available cash balance was at R3, 7 billion (2014: R4,
3 billion). Due to stringent management initiatives, operating costs saw a 14%
decline, compared to last year.
The company achieved an EBITDA of
R2, 1 billion, a decline of 3%, when compared to R2, 2 billion in the 2014/15
financial year. The decline was attributable mainly to lower sales volumes in
all of the company’s business units and a 44% year-on-year fall in crude oil
prices. PetroSA’s challenges have also been exacerbated by dwindling gas supply
from its Southern Cape indigenous fields.
The net loss is inclusive of a R254
million net impairment charge that was booked against overvalued onshore and
offshore production assets. An
impairment charge arises when the value of the entity’s operating assets is
eroded due to internal or external circumstances such as the non-realisation of
expected reserves and / or the fall in crude oil prices.
"Notwithstanding our recent
credible performance, our financial position remains precarious and is further compounded
by a challenging operating environment. Exogenous factors such as weak
commodity prices and volatile currency swings continue to pose a threat to the
company,” Mr Siphamandla Mthethwa, PetroSA’s Acting Group CEO said.
The year ended 31 March 2016 saw
sales volumes from the Mossel Bay GTL Refinery and purchased products decline
by 17% and 4% respectively, from the budget, whilst sales volumes from the
Ghana asset were, however, 35% higher than the previous year. These gains were,
however, eroded by the fall in crude oil prices.
During the period under review
PetroSA made a concerted effort to ensure compliance with the environmental legislation
applicable to its abandonment liability. According to the National
Environmental Management Act (NEMA) PetroSA has an obligation to abandon and rehabilitate
its offshore or onshore facilities, at a point in time when it ceases
production activities. In terms of the NEMA Financial Provision Regulations
pertaining to the financial provision for prospecting, exploration, mining or
production operations promulgated in November 2015, companies, such as PetroSA,
are required to have a fully funded abandonment liability by February 2017,
even though the rehabilitation work can only occur when a company ceases production
activities at a point in the future.
PetroSA’s abandonment liability is
currently estimated at R10, 7 billion. The company has ring-fenced an amount of
R2 billion for purposes of funding its abandonment obligation. Based on
PetroSA’s current financial position and projected cash flows, the company is
unable to bring the financial provision in line with its abandonment liability.
“We are exploring a variety of
options to manage the abandonment liability. Working together with CEF, PetroSA
has engaged various government departments including, the Department of Energy,
the National Treasury and the Department of Mineral Resources to seek a
deferment/postponement or to secure a government guarantee to fund the
liability. In addition to our engagements with a range of relevant stakeholders
in the regulatory sphere - with a view to finding a bespoke solution in the
best interest of all parties - we also provided written comments on the
amendment of the NEMA Financial Provision Regulation published by the
Department of Environmental Affairs in September 2016,” Mr Mthethwa said.
“We are pleased that these
collaborative efforts have yielded positive results by way of an amendment of
the Financial Provision Regulations providing an extension of the transition
period from 15 months to 39 months. This reprieve will allow PetroSA an opportunity
to focus its attention on enhancing its ability to continue to trade as a going
concern while making the required financial provision in due course. The most
important aspect though is that we are not planning to cease operations anytime
soon,” he added.
In partnership with CEF, (the group
shareholder company), PetroSA has also been hard at work devising a turnaround
plan for the business. The plan was recently submitted to the Department
of Energy for ratification and
approval. It advocates for the implementation of a two-pronged approach that in
the short-term; firstly, is focussed on restoring the sustainability of the GTL
Refinery and; secondly, optimising processes across the company. To achieve
sustainability of the GTL Refinery PetroSA engineers have successfully decreased
the facility’s gas feedstock throughput rate, whilst also increasing the
plant’s ability to process liquid feedstock.
In the long-term the plan promotes
the implementation of a rigorous partnership strategy with other companies in
order to de-risk investments and the utilisation of the company’s asset base to
advance revenue generation across a range of diversified sources.
Despite a challenging operating
environment during the past year, PetroSA was able to register a number of
notable successes. These include, among others:
- The achievement of a 17, 3% saving in operational costs.
- The successful implementation of a voluntary employment separation process that saw 182 permanent employees depart the company, realising an annual saving of R146, 8 million.
- Expenditure in B-BBEE compliant companies was 84, 7% (R4, 5 billion) of discretionary spend.
- The company received an unqualified audit opinion from the Auditor General.
- PetroSA Ghana has continued to expand its production capacity. Since inception the Jubilee field has produced 169.24 MMbbls of oil, with PetroSA’s entitlement amounting to 4.62 MMbbls. PetroSA also expects 9 MMbbls of oil and 13.8 Bcf of gas from the TEN fields, which began production in August 2016.
- Successfully attracting strategic partners for upstream assets during a farm-out process.
deliberate focus on cost-containment, the company has continued to excel in transformation
initiatives that have realized the following successes:
- 13 Black-owned businesses were incubated into an Enterprise and Supplier Development programme. The companies are provided with business development support in the areas of marketing, financial management and accounting, market access and compliance, among others.
- The Mossel Bay-based Centre of Excellence (CoE), which is a training facility for artisans had an intake of 218 students at the end of March 2016. The CoE is the only SAQA-accredited facility for artisanal training in the Southern Cape. To date over 1000 artisans have graduated from the CoE.
- PetroSA invested R60 million towards Corporate Social Investment Initiatives during the period. These included the construction of an Integrated Energy Centre (IeC) at Qamata, Eastern Cape, the building of clinics, sports facilities and schools.
“We are not out of the woods, just
yet. We expect the current challenging global economic environment to persist
for some time. Our feedstock and financial challenges are also still a
persistent and ever present reality. With hard work and a dogged commitment to
implement the turnaround plan, we however expect that the scenario should begin
to improve for the company,” Mr Mthethwa said.
Note: The full PetroSA 2015/16
Integrated Annual Report is available on www.petrosa.co.za.
For enquiries please contact:
Group Communications Manager