TAQA, the oil, gas power and water company controlled by the Emirate of Abu Dhabi, has become the latest upstream business to suffer from the continued depression in US natural gas prices.
Group revenues dropped to AED 6.04 billion from AED 7.07 billion because of a drop in oil and gas receipts.
EBITDA for the second quarter of 2012 was AED 3.04 billion, down 16.7% from AED 3.66 billion for the second quarter last year. US gas prices fell 44% over the same period.
The Henry Hub US natural gas benchmark fell from US$2.96/mmbtu at the beginning of the year, to a low of US$1.84/mmbtu on the 20 April, before recovering to US$2.74/mmbtu on the 30 June.
“Continued weakness of North American gas prices have impacted the overall performance of [TAQA’s] oil and gas business,” the company said in a statement accompanying its results. CEO Carl Sheldon said that the overall gas price weakness has had a “significant impact” on the company’s North American upstream performance.
TAQA has shut in 2,000 barrels of oil equivalent a day of dry gas production, against the company’s overall US production portfolio of around 87,000 boe a day, Sheldon said.
CFO Steven Kersley said the slump in US gas prices was a “short-term blip” that TAQA expects to end in the next three or four years. The company is sitting on cash and near cash liquidity of around AED 20 billion and is not planning any divestment of North American gas assets.
Net profit for the quarter was AED 447 million, up 2.8% on the year, as TAQA’s bottom line was insulated from weak gas prices by lower income tax expenses. Over the month, TAQA’s mix of profits growth shifted from highly-taxed North Sea oil production to tax-free activities in Abu Dhabi.
Before tax effects, profits fell 20.4% to AED 1.1 billion.
Group revenues for the quarter were AED 6.04 billion, down 14.5% from AED 7.07 billion for the same period last year.
Net profit for the first half of the year is up 67.1% to AED 981 million, with a surging oil prices in the first quarter for much of this rise.
Total oil and gas revenues (including gas storage and other income) decreased slightly from AED 6.0 billion to AED 5.9 billion for H1 2012. In addition to lower gas prices, lower production in North America followed non-core asset disposals, offset by higher production and realized prices in the UK North Sea.
Production volumes in the UK North Sea were 43,000 barrels of oil equivalent a day during the period, a 4.4% increase compared to the same period last year. The company says more than 100 million barrels of oil have now passed through the Brent Pipeline System under TAQA’s operatorship. Sheldon said the recent UK tax changes on asset disposals were “very helpful” as divestment by the supermajors is set to continue.
Production in the Netherlands averaged 7,300 boe a day, a 13% decrease compared to the same period last year, reflecting the mature nature of the fields.
Construction of the massive Bergermeer Gas Storage facility is underway, which will see Taqa use expended oil reservoirs as storage for natural gas, a project which will see Bergameer become a gas hub in Europe.
Overall TAQA burned through $949 million in capital expenditure in the first half of the year, broadly on track with its $2.2 billion planned cap-ex. Sheldon says the company is aiming production cap-ex at liquids production.