Having come through a rough patch, a still-wary Taqa is poised to ramp up several key projects now that tighter cost control and favourable markets have fed through to the bottom line. Uncertainty still hangs, however, over the company's oil development in Iraqi Kurdistan.
Taqa, also known as Abu Dhabi National Energy Company, yesterday reported a sharp recovery in the first half of the year, rebounding from last year’s losses with record earnings bolstered by record oil and gas production and favourable market prices.
Edward LaFehr, who took over operational leadership of the company from Carl Sheldon earlier this year, highlighted record production of 158,000 barrels of oil equivalent in the first half of the year, up 24 per cent on the same period last year.
A rebound in the North Sea UK sector was primarily responsible, as problems at its Cormorant Alpha field were sorted out. The better performance, lower costs, and higher oil and gas prices fed through to record gross earnings of Dh7.9 billion, up 42 per cent on last year.
While Taqa has continued to trim fat and focus on less risky projects this year – exiting, for example, power projects in India and Iraqi Kurdistan – it is pursuing a growth strategy that is more conservative, according to Mr LaFehr. This includes the ramping up of the Bergermeer gas storage project in the Netherlands, which began commercial operations earlier this year and will reach full capacity around April.
The Bergermeer project has been in the works since 2012, and once complete, will supply customers hat include Statoil, EDF, Vattenfall and Gazprom, Taqa’s strategic partner in the project.
Bergermeer will be Europe’s third-largest gas storage facility, nearly doubling the Netherlands’ storage capacity, and supplying the equivalent of 2.5 million Dutch households’ annual gas consumption.
“Bergermeer … should underpin material growth over the next two years”, improving the company’s cash flow and allowing it to resume dividend increases for its shareholders, according to analysts at Goldman Sachs.
Taqa executives focused on the company’s conservative approach going forward, emphasising the commitment to achieve a stand-alone investment grade debt rating by continuing to reduce debt.
Earlier this year, Taqa refinanced $1.2bn of bond debt that was coming due next month at lower interest cost.
Taqa’s chief financial officer, Stephen Kersley, also noted how a staff reduction and other cuts brought general and administrative costs down by 15 per cent, while operating expenses were held steady despite cost pressures.
A key target ratio of net debt to gross earnings fell to 4.8 this year from 5.6, but Taqa wants to bring it down closer to 4.
The company still expects more than $2bn of capital expenditure on projects this year, but that is down from $2.4bn last year.
After pulling its people out of Iraqi Kurdistan last week due to the violence moving closer to its Atrush Block project, the company said it did not expect any long-term effect. The project is still at the drilling stage. The total cost for developing the first phase is estimated at $300m.
amcauley@thenational.ae
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