Taqa losses widen in second quarter despite steep spending cuts

Taqa’s pre-tax loss for the second quarter more than doubled to Dh626 million from a Dh306m loss for last year’s second quarter.

The Taqa Harding oil production platform in the North Sea. Courtesy Taqa

Taqa reported a widening loss in the second quarter driven by lower realised oil and gas prices on its North American and European assets.

The group, known officially as Abu Dhabi National Energy Company, may tap bond markets this year to refinance US$1.25 billion of bonds coming due next year, following a $1bn refinancing in June, chief financial officer Grant Gillon told investors.

Revenue fell to Dh4.03bn in the quarter from Dh4.7bn a year earlier as it reported a net loss of Dh588 million – a 40 per cent increase on the loss reported a year earlier.

“It was a difficult start to the year,” said Saeed Al Dhaheri, the acting chief operating officer since Edward LaFehr resigned in June.

The company emphasised its operational performance and cost-cutting.

“Despite achieving significant cost reductions, including a 73 per cent cut in capex, we safely maintained oil and gas volumes and increased power production above our previous record highs,” Mr Al Dhaheri said.

Taqa also focused on its US$1bn bond refinancing in June, with the two $500m tranches, saving Dh70m annually in financing costs.

The company’s accounts noted that had it not sec­ured refinancing in June of a $1bn bond, its current liabilities at the end of June would have exceeded current assets by Dh2.5bn.

Mr Gillon said the company is considering tapping the bond market again as it has $1.25bn of bond coming due in March and October next year.

“It is certainly a possibility that we come back to the market this year to manage those maturities as they approach,” Mr Gillon said.

Taqa also noted that it may have financing obligations to decommission assets in the North Sea, where it operates the Brent system, that might require it to lean on its parent company further to provide letters of credit or collateral in excess of $1bn.

Taqa’s losses would have been much wider if it didn’t have in place a deal for a so far unnamed “related entity” to buy much of its overseas oil and gas assets at well above market rates. In the first quarter, this meant that Taqa was able to avoid recognising $3.4bn in loss of value of its oil and gas assets in North America, Europe and the Kurdish region of Iraq, in the Atrush block.

Taqa’s largest shareholder, Adwea, has a stake of 52.3 per cent and to­ge­ther with other Abu Dhabi government entities, owns just over 75 per cent of the company, with the rest listed publicly and held by UAE shareholders.

Taqa’s thinly traded shares were down 2 fils at 54 fils in early trading .

The cost-cutting programme over 18 months has resulted in a reduction in spending of Dh2bn, including Dh458m of annual operating costs.

Capital spending was down Dh1.3bn, or 73 per cent, in the first half of this year, but oil and gas output was down just 2 per cent at just over 147,000 barrels per day equivalent.

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