PETRO WELT TECHNOLOGIES AG oil AG Annual Report 2015:
Successful operations under challenging market conditions, but currency and oil price stress earnings and financial results in euroResults in line with guidance
Revenue in Russian roubles increased by 4.4%
Sales revenues in euros decreased by 21.8% to EUR 322.5 million
EBITDA contracted by 28.0% to EUR 81.5 million
Consolidated net profit reached EUR 20.3 million in 2015
Equity ratio improved from 44.5% to 48.3%
No dividend payment proposed to AGM to keep key financials strong as a necessary basis for future development
Vienna/Moscow, 28 April 2016
Operating performance of the Group2015 was a defining year for C.A.T. oil AG, a year in which the foundation was laid for the further development of the Group. In spite of extremely challenging economic conditions, the
oil Group led by a new management team developed satisfactorily, both in terms of its operating business as well as from a financial point of view.
The number of service jobs increased from 4,489 in 2014 to 4,975 in 2015, comprising an increase of 10.8%. Revenue generated in Russian roubles was up by 4.4%. The consolidated financial statements expressed in euros show a performance slightly above the original guidance and the expected results. Revenue for the year 2015 totaled EUR 322.5 million, whereas EBITDA and EBIT amounted to EUR 81.5 and 31.0 million respectively. Accordingly, C.A.T. oil AG performed clearly better than its peers.
Yury Semenov, CEO, and Valeriy Inyushin, CFO, on the performance of C.A.T. oil AG: "We are proud of our achieving an increase in the number of contract scopes and revenues in the local currency despite the backdrop of the current market environment featuring difficult conditions for the oil field service business in Russia and CIS. We maintained our financial solidity by a proactive approach in managing, by a disciplined cost control and strong balance sheet structure, enabling us to calmly and confidently look ahead to the upcoming months. Today, we have already marketed almost all our operation capacities across all service segments for the year 2016."
The most important business achievements of C.A.T. oil Group in 2015 were as follows:The companyʼs market position was maintained in drilling and expanded in the fracturing segment.
A sufficient EBITDA margin and operating cash flow continued to be generated.
Capex and opex control were optimized.
The Group business was converted to the self-financing model without the need for external resources.
A solid cash position was maintained during the year.
A conversion program for intergroup debt-to-equity was launched, aiming to improve profitability of operating units and the Groupʼs equity structure.
The entire equipment portfolio of C.A.T. oil AG was completely utilized throughout 2015. The company currently has sufficient equipment at its disposal in the light of the particular situation prevailing on the Russian market for oil and gas exploration and production. Against the backdrop of restrained customer investments and price pressure on service fees, the management of C.A.T. oil pursued a flexible investment policy, focusing mainly on carrying out the required replacement and maintenance investments.
Leading position in fracturingAnother highlight in the companyʼs operating business in 2015 was the record level of drilling in the Orenburg region. Horizontal drilling of more than 1,000 meters was successfully concluded for the customer Gazprom Neft in only 12.3 days. This unprecedented achievement was also recognized by the industry. Moreover, the 30,000th fracturing job in the history of the company was carried out in June/July 2015. This milestone demonstrates the leading market position of C.A.T. oil AG in the application of this technology on the Russian market as well as the high customer satisfaction.
Introduction of a holistic management approachThe goal of the new Management Board is to ensure the further development of C.A.T. oil Group. In particular, the objective is to quickly and comprehensively generate synergies in the management and administration of business operations. Additionally, the new Management Board aims to further expand the companyʼs high-quality services and develop proprietary oil field service know-how in order to secure the companyʼs sustainable competitiveness in the future.
For this purpose, a fully-owned subsidiary of C.A.T. oil directly below the level of the parent company was established in the fall of 2015. The company, LLC "Petro Welt Technologies", short LLC "Pe-We-Te" headquartered in Moscow, has the right to issue directives and intervene in the activities of the operating subsidiaries of C.A.T. oil AG. Pe-We-Te assumed responsibility for a number of administrative services from the operating subsidiaries such as finance, liquidity management, human resources and above all procurement. This step is designed to serve as the basis for generating synergies and ensuring the ongoing further development of unified quality standards.
Revenue developmentTotal Group revenues measured in Russian roubles increased by 4.4% in the 2015 financial year. In contrast, revenues in the Group currency, the euro, reduced by 21.8% to EUR 322.5 million from EUR 412.1 million in the previous year. The high quality services rendered by
C.A.T. oil AG on the basis of the top-notch quality of the employees deployed and the high technological standards of the technical equipment has made the company more resistant against unfavourable market conditions.
The deteriorating economic conditions reflected in the pressure on service fees and the changed structure of service jobs related to the cost savings programs implemented by customers are clearly shown by the average per job revenue. This indicator declined by 27.8% to EUR 37,400 per job in the Well Services segment against the backdrop of a 10.8% rise in the number of service jobs. In the Drilling, Sidetracking and IPM segment, average per job revenue fell by 31.4%, with the number of jobs increasing by 11.2%.
Reduced costs and increased efficiencyThe cost of sales declined by 15.2% or EUR 48.7 million to EUR 271.5 million from EUR
320.2 million in the previous year. This decrease is comparable with the devaluation of the Russian rouble during 2015 (-16.6%), showing that the management of C.A.T. oil AG was able to successfully increase the efficiency of the operating business and reduce costs incurred in US dollars or euros. This improvement took place in spite of the conclusion of an investment program designed to expand capacities. However, it was not sufficient to cover the decrease of revenues expressed in euros based on the average exchange rate dynamics of 2015 versus 2014.
Development of earningsThe gross profit declined by 44.6% in the financial year 2015 to EUR 51.0 million, down from
92.0 million in the previous year. The gross profit margin equalled 15.8% (down from 22.3% in 2014), which can be considered as a relatively comfortable level for corporate finances in such a challenging market environment.
EBITDA development was quite successful in 2015. Firstly, its margin was maintained at 25.3%, just marginally below the level of 27.5% in 2014. Secondly, the EBITDA decline in Russian roubles was only 4%. Accordingly, despite the 28% EBITDA decrease in euro terms, from 113.2 million in 2014 to 81.5 million in 2015, it had a limited impact on the company. The Group preserved its ability to generate a robust operating cash flow and even increased it in Russian rouble terms by 12%.
The operating result reported as earnings before interest and taxes (EBIT) deteriorated by 54.4% in the year under review to EUR 31.0 million, down from the prior-year level of EUR
67.9 million. This was due to the insufficient compensation through a reduction in general and administrative expenses.
The financial result in 2015 was minus EUR 1.9 million, compared to the positive financial result of EUR 3.2 million in 2014. This development can be mainly attributed to exchange rate changes. The net profit before tax amounted to EUR 29.0 million.
The more pronounced drop in the net profit compared to the profit before tax (-62.5% versus
-59.1% yoy) can be primarily attributed to the increase in the effective tax rate from 24% in 2014 to 30% in 2015. This is due to additional tax payments in Russia and specifying taxes for previous periods. Earnings per share equalled EUR 0.42 for the 2015 financial year, lower than the level of EUR 1.11 per share in 2014.
Dividend for the financial year 2015In the event of attractive investment opportunities, the company is considering to enter new geographical markets on the basis of established and new business relationships or playing an active role in the consolidation process on the market for service providers to the oil
industry. For this reason, a solid structure of the balance sheet is necessary. The Management Board and Supervisory Board willl therefore propose that the Annual General Meeting approves the intention not to distribute any dividend for the financial year 2015. The dividend for 2014 amounted to EUR 0.12 per share.
Development of equity and balance sheet structureIn 2015, the equity ratio could be increased to 48.3%, up from 44.5% in 2014. This is mainly due to the reduction in the balance sheet total, from EUR 379.8 million to EUR 301.3 million, and debt-to-equity program launched in the operational companies. For one thing, the valuation of assets was lower as a result of the loss in value of the Russian rouble. In addition, the non-current and current liabilities of C.A.T. oil were substantially reduced. Equity of the Group fell to EUR 145.5 million as at 31 December 2015 compared to EUR 168.9 million at the end of 2014. The non-current assets of C.A.T. oil AG recognized to the amount of EUR 156.4 million were more than offset by equity and non-current liabilities totalling EUR
249.7 million. At the end of 2015, total net debt amounted to EUR 104.5 million, which corresponds to a factor of 1.3 EBITDA.
Cash flow developmentBased on an EBITDA of EUR 81.5 million in 2015 (2014: EUR 113.2 million), the cash flow from operating activities amounted to EUR 67.3 million, down from the prior-year figure of EUR 80.1 million. The negative impact of the reduction in the profit before tax was partly compensated by the improved dynamics of working capital (2015: EUR -985 thousand, 2014: EUR -20.1 million). The Management Board succeeded in limiting the cash flow decline thanks to its stringent receivables management and improved contract conditions.
Following delivery of the equipment ordered in 2014, investment activity was considerably cut back in 2015. Capital expenditures in property, plant and equipment totalled EUR 57.6 million, compared to EUR 134.8 million in the previous year.
The cash flow from financing activities was minus EUR 29.7 million, down from EUR 84.7 million in 2014. The main reason was the early total repayment of a loan to Sberbank of Russia.
Guidance for revenues and earnings levelsBased on these general assumptions - calculating with an exchange rate of 80-82 Russian rouble for 1 euro - and assured by almost fully contracted capacities, the management expects revenue from operations in Russian rouble to raise by 1 or 2% in 2016. The margins regarding EBIT and EBITDA are expected to keep their satisfactory level around 12% and 25% respectively. The Management will keep a focus on cost of sales which are expected to keep their current level in Russian rouble.
Contact: Scholdan & Company
+43-1-513 23 88-0
ir@catoilag.com press@catoilag.com
The consolidated annual report for 2015 can be downloaded at www.catoilag.com.
C.A.T. Oil AG issued this content on 28 April 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 28 April 2016 20:51:03 UTC
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