Enap Profit Down, Chile

The consolidated result of ENAP Holding for the period January 1st to March 31st, 2012, measured as profit after income tax and special tax of 40%, amounted US$-236 million, which generates a negative variation of US$265 million compared to the same period in 2011.

An important part of this result is marked by the result of the first quarter, which reached US$-110 million, while those of the second and third quarters reached US$-60 and US$66 million, respectively.

The main causes for this variation are due to:

1. A 29% decrease of the refining margin (income minus cost of crude oil) due to the increase of prices of Latin American crude oil basket indexed to WTI, to which ENAP has access, and that could not be offset by the price increases of the products because of the policy of international parity price established by ENAP.
2. The suspension of the program of incentives to oil production established by the government of Argentina, generating a loss of US$ 42 million to the subsidiary Sipetrol Argentina as compared to the same period of the previous year.
3. The variations of the international price of Liquefied Gas (LPG) decreased ENAP’s margin in this business by approximately US$25 million.
4. The higher cost of energy, which led to a reduction of the production levels of the refineries, to maximize the margin in this complex scenario. To meet the sales contracts, the lower production was replaced with fuel imports from the international market, thus, reducing the negative impact to US$20 million.
5. During August and part of September, a maintenance stoppage was carried out in Refinería Aconcagua, which will enable to enhance future availability, but it had an impact reducing the production level during this period.
6. The accumulated losses as of September 2012 generated an income tax profit, which compared to the income tax of 2011 it has a positive impact of US$ 126 million.

In addition to these factors, there are the structural conditions to which the company is exposed, such as:

1. Reduced competitiveness with international refineries of the Gulf Coast of Mexico marking the Import Parity Price applied by ENAP to its products, in order to promote a competitive and open market, associated to the higher cost of crude oil imports due to existing tariffs, which reached 6%.
2. Increased prices of Latin American crude oil, higher than the Brent crude oil global benchmark price increase, as a result of China’s dynamic demand for these crude oils, causing a relative shortage in the Region since late 2011.
3. High financial burden because of the historic debt of the Company, which resulted into high-interest payments during the third quarter, of US$ 152 million.

Assets, Financial Debt and Ebitda

As of September 30, 2012, ENAP’s total assets increased by 4.3%, from US$6,203 million on December 31, 2011, to US$6,470 million on September 30, 2012.

This increase is mainly due to: a) Increase of the item Trade Receivables for US$287 million, due mainly to increased sales during September 2012 as compared to December 2011. b) Increase of Deferred Taxes by US$128 million due to the acknowledgement of credits associated to higher tax losses; c) Decrease of the Cash and Cash Equivalent items of US$118 million due to the closing position as of September 2012; and d) Reduction of the Inventories item by US$35 million due to a better management of the working capital.

As of September 30, 2012, current and non-current liabilities (excluding equity) increased by US$513 million (8.9%), compared to December 31, 2011. The main variations are given in the item “Other Current and Non-Current Financial Liabilities” by US$305 million, and the trade accounts payable, which increased US$178 million due to a higher level of operations for the period.

The EBITDA generated by ENAP as of September 30, 2012, was US$37 million.

[mappress]
LNG World News Staff, November 27, 2012; Image: Enap