Petrom on its way to becoming a leading integrated energy player in SEE

Petrom on its way to becoming a
leading integrated energy player in SEE

January - June 2010

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2 | Petrom Group Q2/10

Presentation outline

1. Petrom’s heritage: 150 years of Romanian oil history

2. Petrom today

3. Romanian macro economic environment

4. Our strategic directions

5. Conclusions

6. Petrom Group results for Q2/10 (consolidated, IFRS)


Petrom’s heritage: 150 years of Romanian oil history [1/2]
1857 First officially reported Oil Production in Romania: 275 t Peak oil:
14.7 Mn t in 1976
1861 First well manually drilled by means of wooden rods and gimlet type bits

1895 Mining Law – oil exploitation can only be carried out by the land owner

1906 Romania’s Geological Institute set up

1907 World Petroleum Congress in Bucharest

1913 First natural gas production

1927 First electric logging performed by Schlumberger in Romania

1936 Highest oil production between the two World Wars: 8.7 mn t

1940 First gas storage (10 mn sqm in Boldesti field)

1942 First seismic survey in Banat - Crisana

1975 First exploration drilling in the Black Sea

1987 First crude oil production offshore (Black Sea)

2004 Petrom privatization

2009

Petrom’s heritage: 150 years of Romanian oil history [2/2]
1997 2008 2009
Agreement signed with Upstream acquisition
Establishment of the 2006
ExxonMobil to explore in Kazakhstan –
vertically integrated Acquisition of a 74.9%
NOC Petrom SA* hydrocarbon potential of Korned LLP holding
stake of Ring Oil Holding
the Neptun Block offshore exploration license
& Trading Ltd (Russia)
deepwater portion for undeveloped
1991 (Romania) Kultuk oilfield
Establishment of Petrom
RA (E&P company only)
2004
2007 2009 2010
Acquisition of 51%
Acquisition of 55.53% Petrom began Gas sales
of Petrom’s share
1960 –1964 of Shell Gas Romania the construction activities
capital by OMV,
Establishment of (LPG) and 60% of of the Brazi gas transferred to
Austria
Petrobrazi refinery Trans Gas Services fired power plant OMV Petrom
Gas SRL

2006 2008
1965 –1969 1998 Acquisition of 99.9% Acquisition of 2010
Establishment of First field operated of the share capital of the oil services Partnership Petrom–
Arpechim refinery in Kazakhstan three OMV retail business of Petrofac to enhance
networks (Romania, Petromservice production in 9 onshore
Bulgaria and Serbia) fields in Ticleni area by
at least 50%, in the next
2001
1987 2006 5 years
Starts trading 2009/2010
First offshore crude Take over of 30 filling stations
of Petrom Transfer to Oltchim
production, Lebada from MOL Romania,
shares on BSE of Arpechim
East field 95% stake in Aviation
refinery’s
Petroleum, MOL Romania’s
petrochemical assets
aviation business

* Through the merger of Petrom RA, Arpechim, Petrobrazi, 41 retail branches, Transpeco and Petrotrans (transport)



2. Petrom today



5. Conclusions



Solid shareholder structure
EBRD At a glance 2007 2008 2009
Property
2.03%
Fund Free float Number of shares
20.11% 6.21% (mn) 56,644,108,335 56,644,108,335 56,644,108,335
Mcap (RON mn)¹ 28,152 10,253 14,104
Mcap (EUR mn)¹ 8,056 2,609 3,336
Year's high (RON) 0.6200 0.5600 0.2920
Year's low (RON) 0.4790 0.1290 0.1160
Year end (RON) 0.4970 0.1810 0.2490
Ministry of
OMV EPS (RON/share) 0.0314 0.0180 0.0241
Economy
51.01%
20.64% Dividend/ share (RON) 0.0191 0 0
Dividend yield¹ 3.8% 0 0
Payout ratio 61% 0 0

► OMV, leading energy Group in CE/SEE, as majority shareholder
► Property Fund (60% state-owned), to be listed on BSE
► State holding, but no golden share
Listed on Bucharest Stock Exchange (6.2% free float)
Petrom’s governance follows the two-tier management principle
¹ Calculated based on the share price as of the last trading day of the respective year


Significant economic influence in Romania

Petrom sales to GDP ratio 2.6%
Petrom sales to GDP ratio 2.6%
Output (2-2.5 times higher if the indirect effects are
(2-2.5 times higher if the indirect effects are
included)
included)

Petrom is the
Petrom is the
Approx. 27,500 employed by OMV Petrom SA
Approx. 27,500 employed by OMV Petrom SA
largest Romanian
largest Romanian
company by: Employment (( 0.6% of Romania’s employment; 3-3.5 times
0.6% of Romania’s employment; 3-3.5 times
company by: higher if indirect effects are considered)
higher if indirect effects are considered)

Turnover
Turnover
No. of employees*
No. of employees* Government budget Around 12% in direct contributions to the
Around 12% in direct contributions to the
Contributions to
Contributions to contributions state budget (RON 6.7 bn)
state budget (RON 6.7 bn)
the state budget
the state budget
Capital investment
Capital investment 3.3% of total economy-wide investments
3.3% of total economy-wide investments
Stock market
Stock market Petrom’s investments in 2009 equivalent to
Petrom’s investments in 2009 equivalent to
capitalization
capitalization Capital investments around 20% of Romania’s budgetary public
around 20% of Romania’s budgetary public
investments in 2009
investments in 2009
Substantial impact on other sectors: > 8,900
Substantial impact on other sectors: > 8,900
Support of suppliers and over 17,000 clients (in 2009)
suppliers and over 17,000 clients (in 2009)
economic growth and Secures: 99% of Romanian oil production; ~
Secures: 99% of Romanian oil production; ~
50% of gas production; ~10% electricity
50% of gas production; ~10% electricity
security of supply market starting 2012
market starting 2012
Data as of December 31, 2009 and referring to OMV Petrom SA
* Largest private employer


Petrom today: leading oil & gas player in SEE, high
degree of physical integration
Exploration and Refining and Gas and
Production Marketing Power
4.4 mn t oil production 2 refineries (Petrobrazi and 4.8 bcm Group gas sales
5.3 bcm gas production Arpechim) Strong position on the Romanian
823 mn boe proved 5.2 mn t crude oil processed; gas market, covering all gas
reserves in Romania thereof imported: 0.8 mn t market segments
814 filling stations at Petrom First power projects operational
Group level in 2011 (power plant Brazi and
4.7 mn t Petrom Group marketing wind park Dorobantu)
sales
Retail market share 40% in
Romania
Upstream and
downstream activities
Upstream activities
Downstream activities

All figures as of December 2009; figures refer to OMV Petrom S.A. unless otherwise specified


Exploration and Production (E&P) today: substantial
potential in mature assets
EBIT (EUR mn) Leading player in Exploration and Production
1200 972
806
Sole crude oil producer in Romania
900 791 796
582 2nd gas producer in Romania
600
Oil & Gas resources:
300
Romania: exploration licenses for 15 onshore
0
2005 2006 2007 2008 2009 and 2 offshore blocks; 256 production licenses
OPEX (USD/boe)
oil and gas fields
20 17.03
18.27 Exploration and production rights in Kazakhstan
15.06
15 13.1 13.87
(Komsomolskoe, Kultuk, TOC fields); exploration
10 rights in Russia
5 Operating ~ 9,100 oil & gas producing wells and
0
7 offshore production platforms in Black Sea
2005 2006 2007 2008 2009

Total Production (mn boe)
Current recovery factor in oil resources: 25%; in
80
79.07
74.64 71.96 71.08
gas resources: 49%
68.29

60
Unlocking our potential:
40
Field re-development
20
Expand existing EOR and IOR programs
0 Drill deep onshore and offshore wells
2005 2006 2007 2008 2009 Significantly improved HSE performance
Graphs present Petrom Group figures Motivated and dedicated teams


Refining and Marketing (R&M) today
EBIT (EUR mn) – including petrochemicals
2005 2006 2007 2008 2009
All fuels produced to EU specifications
0
-100 Terminal modernization in progress (Jilava
-200
-208
-146 terminal was finalized, Brazi currently reached
-300
-400 -338
-274 90% completion)
-500
-489

~80% of total Petrobrazi site surface cleaned
-600

Crude input (kt)

6000 1404 2138
1570 1831
Number one downstream operator in
4000
815
Romania: 40% retail market share in 2009
4996 4725 4347 4290 4346
2000
Operating app. 814 filling stations in
0
Romania and in neighboring countries
2005 2006 2007 2008 2009

Equity import Leading supplier of aviation fuel services
Retail market share (%) in Romania
Number one player on the local LPG market
50
40
40
32
36 All filling stations in Romania operating
30 24
28
under full agency system
20

10
Annual throughput per filling station at
0
4.9 mn l in 2009
2005 2006 2007 2008 2009


Gas and Power (G&P) today
Consolidated EBIT Gas & Power (EUR mn)
60
50 44
49
Strong position on the Romanian gas market,
40
30
covering all gas market segments
30
20
17
Leading gas wholesale company in Romania
10
0 Optimized business model for the gas sales
2006 2007 2008 2009 activity
Gas sales Petrom Group (bcm)
6 5.61
5.24
5.55
5.3
Developing power portfolio: building a 860 MW
4.85
gas fired power plant, entering renewable
4 energy business – wind
2 Combined cycle gas fired power plant project in
Brazi
0
2005 2006 2007 2008 2009 Capacity: 860 MW net = 2 x 280 MW gas
* As of 2008, Doljchim included
turbines + 1 x 300 MW steam turbine
57% efficiency (compared to ~30% mean in
Romania)
First brick ceremony at Brazi: June 3rd,
2009
Wind park “Dorobantu” from Dobrogea with
designated capacity of 45 MW

Brazi CCPP: construction works


Restructuring and modernization in the last 5 years
consolidated Petrom’s position (1/2)
Reserve replacement rate in Romania Consolidation of the E&P business
Natural decline of oil fields largely mitigated
80 71 70 RRR increased to 70% in 2009 from 11% in 2004
60 Well modernization finalized (over 5,000 wells)
38
40 Extended rich drilling and multi-stage fracturing new
20 11 13 technologies successfully applied offshore
0 Large scale 3D seismic to characterize our exploration and
0
2004 2005 2006 2007 2008 2009 development targets (Torcesti, Mamu -onshore, Delta-offshore)
Exxon Mobil JV for deepwater offshore exploration
Oil and condensate production (mn t) Expansion of international activities
6 5.21
4.78
Successful integration of E&P services
4.54 4.54 4.39
5
4
3 Major steps in the restructuring of R&M
2
1
Significantly improved HSE performance
0 Improvement of yield structure, own crude consumption;
2005 2006 2007 2008 2009 products meet EU specifications
Annual throughput/fs in Romania (mn l)* Refineries turnaround cycle improved to 1 every 4 years from
4.6 4.9
5.0 1 per year
3.6
4.0 Sales of petrochemical activities in Arpechim to Oltchim and
3.0
1.9
2.3 fully exit petrochemicals sector
2.0 Group filling stations of 814 in 2009 from 682
1.0
Significant increase of throughput/filling station and
0.0
2005 2006 2007 2008 2009
non-oil business turnover
*As of 2007, includes OMV retail network in Romania


Restructuring and modernization in the last 5 years
consolidated Petrom’s position (2/2)
Exit non-core, non viable business: (petro)chemicals,
Business
Business real estate incl. motels, off-shore mobile drilling units
restructuring &
restructuring & Acquired Petromservice oilfield services business
diversification
diversification activities to optimize E&P services
Expand the gas value chain by entering into the power
market

Productivity increased due to major restructuring and
efficiency improvements performed since 2005 in all
Restructuring
Restructuring business segments
Labor litigations on track to be resolved, no additional
provisions built

Important role in securing the energy supply – the
largest investor in the energy sector (app. EUR 1 bn
p.a. since 2005)
Best practice
Best practice European standards and principles of corporate
company in
company in governance
Romania
Romania Modernized organization, focus on talent
management and performance culture
CSR and dialogue with stakeholders

Key financial indicators (consolidated, IFRS, 2005-2009)
ROACE (%)*
Investments by business segments (EUR mn) Indebtness ratio (%)*
19.99 25
2000 1,837 20 22
21
20
1,339
1500 15 16

925 995 11.09 15

1000 10 9
10
7
340
500 5 5
0.32 0.18 0.22
0 0 0
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009

E&P R&M G&P (incl Doljchim) Corporate and Other

in EUR mn 2005 2006 2007 2008 2009
Sales 3,011 4,332 4,473 5,469 3,795
EBIT 563 719 569 327 382
EBITD 848 1,056 1,015 1,053 969
Net income 488 587 461 243 196
Net income after minorities 487 587 459 266 203
Operating Cash Flow n.a. 794 934 1168 643
Fixed assets 3,646 4,471 5,020 5,852 6,135
Current assets 1,981 2,186 1,820 1,404 1,085
Total liabilities 1,960 2,245 2,494 3,244 3,391
Shareholders' equity 3,667 4,411 4,345 4,012 3,829
EPS (EUR) 0.0101 0.0104 0.0081 0.0047 0.0036
Payout ratio 52% 44% 61% 0 0
Dividend per share (gross, EUR equiv.) 0.0049 0.0051 0.0057 0 0
*Key ratios calculated in RON terms

Solid financial performance since privatization

Consolidated profitability from a loss making business prior to
privatization to strong returns even in challenging years

Resumed dividend allocation, except for years with outstanding
negative environment
Total dividends allocated in 2005 exceeded cumulated dividends
allocated within previous 7 years

Strengthened capacity of cash flow generation

Solid balance sheet, maximum indebtness ratio in past five years
topped 20%

Pursue investments needed to support long term sustainable
development


2009: swift management decisions to mitigate the
economic crisis effects
Optimized cash flow management
Secure external financing and hedging
instruments
Medium and long term financing (EUR 1.6 bn)
from financial markets to support investment
needs; gearing ratio maintained below 30%
Cash impact of oil price hedging in 2009 of RON
524 mn (shown in financial result)
Cost reduction and business restructuring
Adjust refining capacity to 4.2 mn t/y to process
100% of Romanian crude production; Refining
CAPEX for 2010-2014 at EUR 750 mn
Exit chemicals business by end of 2010
Sale of petrochemicals activity within Arpechim
Results of cost reduction visible in all business
segments, especially in E&P
Re-evaluation and prioritization of projects RAS, Petrom SA figures




2. Petrom today



5. Conclusions



Romanian macro environment
Deep recession in 2009. Contraction to continue in
2010, growth expected after 2011 %
R omania and E U‐27 Output D evelopment
B n. E UR

Romania is likely to see a double dip: -3% vs 8
6
170

+2% in CEE4* (2010), followed by a weaker 4 140
than expected growth in 2011 2
0 110
Industry has been the only upward driver in ‐2

terms of GDP, supported by foreign demand; ‐4
‐6 2005 2006 2007 2008 2009 2010* 2011*
80

the domestic counterpart has been sluggish ‐8 50

State expenditures restricted in the medium term G DP , B n. E UR (R HS ) E U‐27 R omania

by the need to bring down the budget deficit from Source: NBR, EC and INSSE data
7.3% in 2009 to a newly agreed target of 6.8% in
2010 (previous target: 5.9%) % Wages, Inflation (Annual Growth Rates) and the NBR Reference Rate
Investments likely to recover more slowly after 30

recent move to hike VAT to 24% 25

Domestic private investment still hampered by 20

higher bank rates 15

FDI halved in 2009 to EUR 4.7 bn 10

5
Banking system relatively sound but still vulnerable
0
to ‘sudden stops’ Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
-5
RON remains highly sensitive to investors’ risk
perception on Romania, leading to additional Nominal Net Wage CPI Inflation NBR Rate

pressures on inflation and banks’ loan portfolios Source: NBR, EC and INSSE data

*CEE4: Czech Republic, Hungary, Poland, Slovakia


Energy sector regulatory framework
Oil and electricity market - liberalized and competitive; implementation process
shows room for improvement
Oil, gas and electricity regulatory framework aligned with EU; room for
further refinements
Gas market – convergence of the domestic price with the import gas price needed
The gas market still faces structural and social obstacles and the adjustment
between domestically produced and import gas prices will probably proceed
only gradually
Gas basket price defined by the market regulator (ANRE)
Weighted average of domestic gas and import gas using import quota
Environmental regulations to be enforced starting 2013 are tough to meet given
current electricity production capacity configuration
Renewable regime - clarification of renewable regulatory framework & medium-
long term strategy for the development of renewable needed
Market challenges:
Role and status of the two state energy companies needs to be clarified
Re-launch privatization in the energetic sector
High level of investments required to meet envisaged EU quality and
environmental standards


Major players on the Romanian oil market (up- and
downstream)
IMPORTS: various PRODUCTION

TRANSPORTATION: Conpet

Refineries (combined capacity ~18 mn tpa)
FUELS
IMPORTS:
Petrobrazi ROMPETROL LUKOIL various
RAFO
Arpechim (Petromidia, Vega) (Petrotel)

Downstream (distribution)

, , Rompetrol, Lukoil, Mol, Others (Rafo, Agip, independent retailers)


Major players on the Romanian gas market

IMPORTS: various
IMPORTS: various PRODUCTION:
PRODUCTION: ,, Romgaz
Romgaz

STORAGE:
STORAGE:
TRANSPORTATION: Transgaz
TRANSPORTATION: Transgaz Romgaz,…
Romgaz,…

SUPPLY:
SUPPLY: ,, Romgaz, GDF Suez Romania, E.ON Gaz Romania,…
Romgaz, GDF Suez Romania, E.ON Gaz Romania,…

DISTRIBUTION: E.ON Gaz Romania, GDF Suez Romania,…
DISTRIBUTION: E.ON Gaz Romania, GDF Suez Romania,…

RESIDENTIAL
RESIDENTIAL
POWER
POWER INDUSTRY
INDUSTRY SECTOR
SECTOR




2. Petrom today



5. Conclusions



E&P 2015: unlock potential and offset natural decline
Finalize redevelopment of 6-8 major fields
Following first deepwater exploration drilling in
2012, complete the deepwater offshore
appraisal and start development
Further develop partnerships
Gas booster compressors installed and gas
systems de-bottlenecking
Complete modernization of facilities in selected
major fields
Start production of Kultuk oilfield in
Kazakhstan
Complete integration of E&P Services into E&P
by 2012
Continued HSEQ improvements, people
development, operational & energy efficiency
increase and strict cost management,
streamlined organization


E&P: key investment projects in Romania
MORENI FIELD RE-DEVELOPMENT OPRISENESTI FIELD RE-DEVELOPMENT

►Design phase & ►Final investment
appraisal program decision in Q1 2011
started

Concept Pre-feasibility Feasibility Execution Concept Pre-feasibility Feasibility Execution

Q1 2010 Q1 2010

SUPLAC FIELD RE-DEVELOPMENT LEBADA EAST FIELD RE-DEVELOPMENT

►Revamping of existing ►Design phase &
facilities ongoing execution of two
►3 horizontal pilot wells sidetracks
to be drilled in 2010 ►Final investment
decision in 2010


Q1 2010 Q1 2010

GAS COMPRESSOR STATION AT HUREZANI MAMU FIELD RE-DEVELOPMENT

►First gas delivery ►Madulari plant
achieved on 29th of upgraded
May 2010 ►Two wells drilled
►New plant decision
depending on well
tests


2010
2010

R&M: maximize integration value and strengthen
position on fuels market
Grow premium brand and quality leadership with focus on profitability

Further increase network efficiency and increase throughput / filling station
(Romania: 4.91 5.2 mnl)
Marketing

Continue two brand strategy (OMV & Petrom): rebranding of Petrom premium
stations (PetromV) into OMV by YE 2010 started
Optimize organization by harmonization of organizational structures and
processes (OMV & Petrom)
First two EuroTruck - Commercial Road Transport dedicated stations are on
stream near to A1 and A2 motorways
Premium bitumen production started in RO and launched on the market

Petrobrazi Refinery operated as upstream integrated refinery
Maximize Petrobrazi integration value by conversion of 100% Romanian crude
Improvements in efficiency and yield structure (EUR 750 mn until 2014, out of which
Refining

EUR 400 mn into modernization by end of 2013)
Energy loss: 142 10%
MD: 302 ~45 %
HFO: 15%2 ~ 7%
Divestment/closure Arpechim by 2012
Modernize storage infrastructure: close old storages and build up modern terminals

1 Basis 2009 2 Basis 2004

Gas and Power: market leader on Romanian gas market
and important power generation supplier
Gas
OMV OMV Petrom S.A.
Petrom internal
customers
Stabilize equity gas volumes
Petrom S.A Gas
E&P Large distribution Enlarge supply portfolio with import and domestic
companies

Power plants &
contracts
Evaluate potential sites for storage business also
large municipalities

Import gas OMV Petrom Gas SRL
& additional
99.99% owned by
OMV Petrom S.A.
Industrial customers
to support Nabucco project
volumes
Trading
Get access to cross border transmission
Petrom Distributie
Commercial Customers Grow gas sales volume in Romania; increase
Gaze SRL
99.99% owned by Households customer base
OMV PetromS.A.
Expand gas marketing into neighboring countries
Domestic gas price convergence to import gas
prices
Power
Operational start up: Brazi CCGT by end 2011, wind park
Dorobantu by mid 2011
Achieve a market share in Romania of up to 10%
Use “Early Mover Position” (first modern CCGT in
Romania) as competitive advantage in a growing
electricity market with over-aged asset structure
Develop renewables

Petrom Group strategic directions for 2015
Targets 2015 Strategic directions
E&P Unlock E&P potential and aim to largely offset Re-develop key fields with different recovery schemes
the natural decline Explore deepwater offshore
Caspian Region to become core market Optimize and ensure long-term production, including partnerships
De-bottleneck gas system
Increase energy efficiency of operations
Modernize production facilities and infrastructure in selected fields
Fully integrate Exploration & Production Services into Petrom Exploration & Production
Develop upstream activities in the Caspian Region
R&M Process 100% domestic crude Petrobrazi Refinery: Maximized value of Romanian upstream integrated refinery
Crude oil consumption for energy and loss:
141 10% Improve yield structure and improve energy efficiency
Middle distillates: 301 ~45 %
Finalize restructuring
HFO: 15%1 ~ 7%
Divest/close Arpechim by 2012 Maintain strong market position with a two-brand strategy in marketing
Increase throughput / filling station in
Romania (4.9 mn l in 2009 / 5.2 mn l in 2015)

G&P Grow gas sales volume in Romania and Establish an electricity sales and trade concept within Petrom
neighboring countries Evaluate gas storage business opportunities
~10% market share on Romanian power Develop a power generation portfolio (Brazi and wind power plants); commercial operations to
market start in 2011
Corporate Increase sustainability rating to Prime mid ► Sustainable development through financial discipline
Sustainability range ► Sound corporate governance principle and sustainable business practices
► High standards of corporate social responsibility
► Industry ‘best practice’ health and safety business practices
► Modern Human resources practices to support the modernization process and enhance
employees performance and satisfaction

1) As of 2004




2. Petrom today



5. Conclusions



Business sustainability and growth potential to be
supported by sizeable investments

2005 - 2009 vs. 2010 investments 2010 onwards
120% High investment still needed for
next years: > EUR 1 bn/year
100% 7% 7%
4%

80% 25%
26%

60%
Pursue up to EUR 600 mn capital increase
%

18%

Strict cost management and optimization
40% initiatives
63%

20%
50%
Gas price convergence
Financial & capital markets
0%
2005-2009 2010
E&P R&M
G&P (including Doljchim) Corporate & Other

Ensure business sustainability and
growth potential


Petrom stays committed to its strategic directions and
sustainable development

Becoming a leading integrated energy
player in Southeastern Europe

Consolidate and
Consolidate and Diversify business
Diversify business Realize full efficiency
Realize full efficiency
grow the
grow the portfolio by
portfolio by potential and
potential and
hydrocarbon
hydrocarbon developing power
developing power maximize the
maximize the
business
business generation
generation integration value
integration value

Sustainable business practices and people performance
Sustainable business practices and people performance


Macro environment and market challenges
Business outlook 2010
Macro environment: main challenges
Severe decrease of private consumption
Decrease of public sector consumption, due to austerity measures
Justice reform
Flexible labor legislation
Lack of a frame to stimulate private and public investments
Balancing immediate needs with a credible economic program on medium terms
Fiscal stability and predictability

Petrom: main market drivers
Crude price, downstream margins and FX to remain volatile
Market demand under pressure

Our focus
E&P: gas de-bottlenecking project in Hurezani, identification, planning and
execution of field re-development projects, organizational streamlining
R&M: modernization of the crude distillation unit and one month turnaround
(Petrobrazi), operations’ optimization in Marketing and two completed terminals by
year’s end
G&P: continue construction of Brazi power plant; gas price convergence to be a
priority topic in the dialogue with the Romanian authorities


Conclusions

Petrom is well positioned to cope with the challenges and capture opportunities
Petrom is well positioned to cope with the challenges and capture opportunities
in the current market
in the current market

Strong shareholder structure, supported by strategic partnership with
OMV further consolidates Petrom’s position

Significant improvements made in the last 5 years laid solid foundation
for future development

Strong value drivers to ensure value creation for shareholders

Continue to consolidate hydrocarbon business and tap market
opportunities to expand into power generation




2. Petrom today



5. Conclusions



Solid results in a favorable crude price environment
underpinned by effective management measures

Solid results in
Q2/10 and
6m/10

Favorable oil price environment Management measures:
Urals crude price rose by 32% over Q2/09 Optimized refinery utilization, with
Arpechim operated on as needed basis
and optimized supply
Cost efficiency measures

Marketing affected by weak
demand
Fuels market demand in 6m/2010 within
operating region decreased by 13% (Romania
down by 12%)
Gas market demand in Romania increased by
10% in 6m/2010 (mainly driven by fertilizers)

Financial IFRS results for Q2/10
Q1/10 Q2/10 Q2/09 ∆% in RON mn 6m/10 6m/09 ∆%

947 728 209 249 EBIT 1,675 539 211

14 133 (159) n.m. Financial result 147 (80) n.m.

(154) (142) (44) 223 Taxes on income (296) (128) 131

807 719 6 n.m. Net income 1,526 331 360

803 718 10 n.m. Net income after minorities 1,521 347 338

0.0142 0.0127 0.0002 n.m. EPS (RON) 0.0268 0.0061 339

913 680 65 n.m. Clean CCS EBIT1 1,593 464 243

Clean CCS Net income after
775 677 (112) n.m. 1,452 282 415
minorities
0.0137 0.0120 (0.002) n.m. Clean CCS EPS (RON) 1 0.0256 0.0050 412

Figures in this and the following tables may not add up due to rounding differences.
1Adjusted for exceptional, non-recurring items; clean CCS figures exclude special items and inventory holding effects (CCS effects) resulting from the fuels

refineries


Cash flow

Q1/10 Q2/10 Q2/09 % in RON mn 6m/10 6m/09 %

961 861 50 n.m. Profit before taxation 1,822 460 296
Depreciation and amortisation including
514 554 512 8 1,068 1,002 7
write-ups
(197) (272) (112) 143 Other adjustments (469) (639) 27

1,277 1,143 450 154 Sources of funds 2,421 823 194

924 1,289 426 203 Net cash from operating activities 2,213 554 299

(689) (1,518) (929) 63 Net cash used in investing activities (2,207) (2,103) 5

321 209 614 (66) Net cash from financing activities 530 1,611 (67)
Cash and cash equivalents at end of
939 935 709 32 935 709 32
period


CAPEX and EBITD

3000
2,748
2,566
2500

1,986
2000
RON mn

1500

1000 835 862

500 360
228
28 62 0 -205
0
E&P R&M G&P Co&O Consolidation Total

-500
Capex: 6m/10 EBITD: 6m/10


Economic environment

World demand: increased in 6m/10 by 2.4%, compared to 6m/09, to 86.1 mn bbl/d
Global production: up by 3% to 86.5 mn bbl/d
Urals price 6m/10 [USD 76.12/bbl ], 49% higher compared to 6m/09
Q1/10 GDP contracted by 2.6% driven by 17% drop in construction and fall across
the board in the service sector
Industrial production rose at an annualized rate of 5.8% in May
Inflation stood at 4.4% at the end of June; VAT rise to push end-year inflation to
around 8%

Q1/10 Q2/10 Q2/09 ∆% NBR FX rates 6m/10 6m/09 ∆% 2009
4.115 4.178 4.192 0 Average EUR/RON FX rate 4.146 4.230 (2) 4.238
2.974 3.283 3.081 7 Average USD/RON FX rate 3.129 3.180 (2) 3.047
4.073 4.352 4.218 3 Closing EUR/RON FX rate 4.352 4.218 3 4.228
3.023 3.570 3.009 19 Closing USD/RON FX rate 3.570 3.009 19 2.936


E&P: Favorable oil price led to a significant increase of
the EBIT
Significantly higher oil prices & stronger USD led to an 87% increase in EBIT vs
Q2/09
Total oil and gas production was 2% lower compared to Q2/09
production in Romania decreased due to natural decline not fully
compensated by new wells drilled and the workover program
Start-up of Hurezani gas delivery system which optimizes the delivery of gas into
the national transportation network
Petrom Group production volum es
(1,000 boe/d)

Q1/10 Q2/10 Q2/09 6m/10 6m/09
890 887 475 EBIT (RON mn) 1 1,777 906
100
94 91
890 887 475 Clean EBIT (RON mn) 1 1,777 906
185 182 185 Total hydrocarbon production (1,000 boe/d) 184 188
75.40 76.86 58.36 Average Urals price (USD/bbl) 76.12 50.99
94 91 91 69.85 66.76 48.50 Average realized crude price (USD/bbl) 2 68.31 47.46
16.65 16.89 14.49 OPEX (USD/boe) 3 16.77 14.60
Q2/08 Q2/09 Q2/10

Oil and NGL Gas 1 Excluding intersegmental profit elimination
2 Realized price includes hedge result
3 Starting with 2010, the calculation of production cost per boe is based on net production available for sale (i.e.

exclusive of own consumption/fuel production). In Q2/10, the impact of this change led to an increase of around
USD 1.30 /boe for Petrom Group

R&M – Flexible refinery operations & cost improvements
compensated lower marketing results
Positive R&M result due to optimized refinery operation and cost
improvements following restructuring efforts
Arpechim in stop and go mode
Optimized supply
Sales of Petrochemicals
Petrom Marketing affected by declining sales volumes as an effect of
economic crises (Retail sales volumes Romania: (5)%)

Marketing
sales volumes (kt)
Q1/10 Q2/10 Q2/09 6m/10 6m/09
16 126 (14) EBIT (RON mn) 143 (294)
(18) 78 (167) Clean CCS EBIT (RON mn) 60 (383)
0.85 0.99 0.14 Indicator refining margin (USD/bbl) 0.92 1.42
1,141 1,148 52 51 67 Utilization rate refineries (%) 51 67
1 ,0 3 2 0.95 0.93 1.18 Refining output (mn t) 1.88 2.57
1.17 1.37 1.49 Total refined product sales (mn t) 2.54 3.07
811 804 829 Marketing retail stations 804 829

Q2/08 Q2/09 Q2/10

R&M – Petrobrazi refinery operated as upstream
integrated refinery
Maximize Petrobrazi integration value by conversion of the Romanian crude oil

Petrobrazi modernization
Streamline refining nameplate capacity to process
around 4 mn t/y domestic crude
Install thermal cracker and bitumen plant
Investment 2010 – 2014: EUR 750 mn
Modernization: EUR 400 mn by YE 2013
Compliance, safety , tankfarm: approx.EUR 350 mn
Adaption of the refinery yield
Fuels & losses: 141 10%
Middle distillates: 301 45 %, HFO: 15%1 7%
Divestment/closure of Arpechim by 2012
Divestment of petrochemicals business in Q1/10
Refinery currently operated in “stop&go” mode
1 Basis 2004


G&P – EBIT affected by economic crisis; new steps to
become an important power generation supplier
EBIT impacted by payment behavior of certain end consumers and negative
result in Doljchim
Consolidated gas sales slightly increased by 5% to 2.48 bn cbm, while the
market increased by 10%
Recommended gas price unchanged
currently represents only approx. 40% of the import price
Significant progress in the construction of Brazi power plant
Acquisition of Dorobantu wind power park
Average gas price for domestic
220 producers in USD/1,000 cbm

200
Q1/10 Q2/10 Q2/09 6m/10 6m/09

180
72 (47) (6) EBIT (RON mn) 25 91
160 73 (47) 1 Clean EBIT (RON mn) 26 103
140 1,549 937 884 Consolidated gas sales (mn bcm) 2,485 2,364
120 Average gas price for domestic
100
212 166 150 161 producers in Romania (USD/1,000 158 156
cbm)
80 161
150
Import gas price (USD/1,000
334 363 370 346 425
60
cbm)1,2
40
1In 2010, ANRE, the Romanian National Authority for Energy Regulation, ceased to publish the domestic
20 and import prices representing the basis for the regulated end user/basket gas price calculation. The gas
prices for domestic producers for 2010 in the table above are the latest published by ANRE for Q4/09
2 Due to above mentioned considerations, the average import gas prices for 2010 were (re) stated taking
0
Q2/08 Q2/09 Q2/10
into account the actual import gas prices published retroactively by ANRE on a monthly basis. As of the
date of this report, the latest available data is for May 2010. Consequently, Q2/10 and 6m/10 figures are
43 | Petrom Group Q2/10 estimates

Contact Investor Relations

Petrom Investor Relations Team
Tel.: +40 372 868930
E-mail: investor.relations.petrom@petrom.com

Homepage: www.petrom.com


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