An African energy company

The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd Reg. No. 1970/008130/07The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd Reg. No. 1970/008130/07

An African energy company

PRESENTATION TO THE PORTFOLIO

COMMITTEE ON MINERALS AND ENERGY

Presented byDr Popo Molefe and Mr Sipho Mkhize

None - Executive Chairman and President & CEO, PetroSA

The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd Reg. No. 1970/008130/07

Agenda

• Introduction

• Shareholder Objectives

• Salient Predetermined Objectives

• Major Challenges

• Way Forward

• Financial Performance


Introduction to PetroSA

• National upstream and downstream petroleum corporation

• International player with African focus

• Established 2002 through merger of State oil E&P company (Soekor) 1969 and GTL company (Mossgas) 1987

• Current business

Exploration, oil and gas production

GTL manufacturing - SA

Oil and chemicals trading


The business strategy for PetroSA is based on achieving and contributing to the following shareholder (Government) objectives:

• PetroSA to achieve sustained commercial viability

• PetroSA to achieve transformation on a continuous basis. • Operating PetroSA in line with best international practices with

regard to Safety, Health, Environment, Quality.

• To contribute to the macro-economic objectives of the country.

Shareholder Objectives


Salient Predetermined Objectives

• Financial viability and sustainability

• SHEQ

• Employment Equity

• Black Economic Empowerment

• Corporate Social Investment



• Favourable operating environment

•Steady plant performance

•Sable field performing above expectations

•Oribi / Oryx producing beyond original estimates

• Macro economic environment

•Higher international oil prices

•Rand strengthening against the Dollar

•Declining interest rates

Operational Environment


• Financial results

•Revenue growth – 19% increase

•Operating Margin – 20% increase

•Profit before tax – 80% increase

•Cost containment

•Lower Gearing

•Strong liquidity

Financial Viability



Salient Predetermined objectives

• Financial viability

• SHEQ






• Retained all ISO accreditations

• Obtain a NOSCAR platinum award for the seventh time

• Orca achieves 2 756 days without disabling injury

• FA platform wins Excellence in Mining and Environmental Management award for the second year

• ZERO fatalities and Environmental spills

• HIV/Aids programme roll out

SHEQ




• SHEQ






• 1 263 employees

• Achieved 69:31 employment equity against a target of 60:40

• 19 % comprise women and aggressive target of 35% set for 2005/6

• First female shift supervisor appointed at the refinery

• Appointed female Process Controller at the offshore platform

Employment Equity




• SHEQ






• R804 million comprising 34% (Target of 50% not achieved)

• R14 million allocated for supplier development

• Five companies included in the pilot phase creating 98 jobs

• Centre of Excellence produced over 300 graduates in various trades such as electricians, welders, riggers, fitters etc.

Black Economic Empowerment




• SHEQ






• PetroSA Development Trust capitalised by R55 million to focus on:> Education and Training> Health > Empowerment of women

• Flagship Projects assisted by the Trust are

•Protec

•Limpopo Online Project

•Computer Laboratories in Limpopo and KwaNonqaba

•Construction of schools in Mossel Bay and Limpopo

Corporate Social Investment


Major Challenges

• Major cash flow stream of PetroSA under threat as FA/EM gas supply to Manufacturing plant depleted by 2007

• Secure long-term feedstock supply to Manufacturing plant on a commercial viable basis

• Uncertainty exists as to total investment required to secure feedstock for Manufacturing plant

• Expand E& P asset base aggressively


Major Challenges

• Financing of projects by utilising strength of balance sheet limited due to short period of secured cash flow generation from current operations

• Streamlining of internal business processes

• Supply agreements and retail markets

Supply agreement/MOU with other petroleum companies is limited to 3 years.

PetroSA has no access to the retail market and is therefore always dependent on, and sometimes held to ransom by, the competition in terms of its supply agreements.


Way Forward

• Finalise evaluations as to optimal feedstock solution for Manufacturing plant and associated investment required as matter of urgency

• Pursue aggressive growth in E & P asset base, organically and non-organically


FINANCIAL PERFORMANCE

31 MARCH 2005


Economic Indicators

2004/5 2003/4 2002/3

Average crude oil price $42.10/bbl $28.97/bbl $27.58/bbl

Average R/$ exchange rate 6.28 7.20 9.82

Impact on profit: $1 change in price R124m R92m R164m

R1 change in exchange rate ? R436m R33m R382m


PetroSA Annual Revenues2001/2 to 2004/5

0

1000

2000

3000

4000

5000

6000

7000

Petrochemicals Crude Fuels Total

Reve

nue

(ZAR

mill

ions

)

2001/02 2002/03 2003/04 2004/05


Abridged Income Statement

2004

R’m

Gross Revenue 3 473

Operating Profit/(Loss) (396)

Net Investment Income 636

Taxation (1)

Profit after taxation 239

2005

R’m

6 446

1 715

137

(115)

1 737

Volume variance 1 614Oil Price variance 1 648Exchange rate var (650)Subsidiary sales 361Total Sales Variance 2 973

Increased Revenue 2 973Condensate (116)Provisions (514)Shutdown 270

Other Expenses (262)Subsidiary expenses (240)Operating Profit Change 2 111


Abridged Balance Sheet

2005 2004 2003

R’m R’m R’m

Assets

Non-current assets 4 445 5 385 5 791

Amounts held by holding company

1 594 1 594 1 594

Current Assets 1 584 2 291 1 366

Cash and cash equivalents 5573 2 637 2 973

13 196 11 907 11 724

Equity and liabilities

Capital and reserves 9 233 7 503 7 359

Long-term loans-shareholder 312 958 1 481

Non-current provisions 2 847 2 461 2 142

Current liabilities 804 985 742

13 196 11 907 11 724


Abridged Cash Flow

2005 2004 2003

R’m R’m R’m

Cash generated by operating activities 4 053 271 801

Cash utilised in investing activities (288) (382) 67

Loans repaid (830) (224) (2 006)

Increase in cash and cash equivalents 2 935 (335) (1 138)

Cash and cash equivalents at beginning of year

2 638 2 973 4 111

Cash and cash equivalents at end of year

5 573 2 638 2 973


Discussion

An African energy company

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