Strategic and Operational Performance Assessment at Petrom

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Contents:

  • Introduction : About Petrom

- Industry and competitor analysis

  • Process Management

- The innovative side of the company

- Exploration and Productio

- Refining and Marketing

- Gas and Power

  • Strategic Level Assessment
  • Operational Level Assesment
  • Future Predictions

- Resources for the Future

- Respect for the Future

  • Analysis and Conclusions

Project based on Petrom inside information.

Introduction

With activities in the business segments of Exploration and Production, Refining, Marketing as well as Gas, Petrom has proved oil and gas reserves of 940 mn boe, a maximum refining capacity of 8 million metric tons per year, approximately 550 filling stations in Romania and 269 filling stations in Moldova, Bulgaria and Serbia. In 2008, the turnover of the company was EUR 4,552 mn and EBITDA was EUR 969 million. After its privatization in 2004, the company recorded positive results. The modernization process initiated in 2005 is underway in accordance.

Petrom is the sole crude oil producer in Romania and accounts for half of Romanian gas production. The domestic and international oil and gas production amounted to 71   in 2008. The aim of the company is to stabilize and increase the production of the mature fields they operate, through a sustained and comprehensive investment program.

The company produces crude oil at two refineries, Petrobrazi and Arpechim, with a total installed capacity of 8 mn tons per year. In order to improve their product quality and productivity, they have implemented a significant restructuring and modernization program, underpinned by capital investments. We supply our products through 550 filling stations in Romania, and a further 269 stations in neighboring countries (including our affiliates). The company is also the leading provider of aviation fuel services in Romania and the number one player on the local LPG market.

Petrom is an important player in the Romanian gas market, covering all gas market segments. In order to leverage the value of natural gas, management decided to further expand the value chain by developing our power generation business. The company is also a significant player in the Romanian chemical industry, with Doljchim chemical plant being an important contributor to the production of chemical fertilizers and  for both the domestic and export market.

Industry and competitor analysis

Petrom, the largest oil and gas producer in South Eastern Europe, has contracted a three-year credit lie of 375 million euros, the company reports.

This is the largest medium-term credit line ever extended to a Romanian company. The loan was granted by a group of five banks – Unicredit Bank Austria AG, Credit Agricole Luxembourg SA, Erste Group Bank AG, Raiffeisen ZentralbankOsterreich AG and Societe Generale Bank & Trust (SGBT), all of which have business ties with Petrom and OMV, the majority shareholder in Petrom.

 

According to Petrom, the loan will be used to cover the financial needs of the company in accordance with the budgets and the current investment programmes of the company.
Petrom is still in full swing of modernisation and restructuring, a process that requires high investment. Investment so far has been sustained by a capital increase performed by OMV when Petrom turned private and by the cash flow generated by Petrom’s activities.

 

This loan became necessary to support an investment programme worth 1.5 billion euros a year. The fact that Petrom has managed to raise medium-term financial pledges from banks, despite the current unstable context, demonstrates that Petrom is consolidating its already solid position.

 

Petrom’s investments over the past three and a half years stood at 3.41 billion euros. Following a revision this June of the strategy for 2010, Petrom is estimating annual investments of nearly 1.5 billion euros in 2008-2010.
Petrom has the largest investment budget of all the local energy companies; it has viable solutions to meet the challenges in this field, and through its projects and initiatives it will contribute to energy supply security in Romania.

 

Most of the 375 million euros will be drawn in euro and RON and, in order to increase loan flexibility, the money may also be drawn in USD. Interest is put at 1.5% per annum over the reference interest rate, which is proof to the quality of the credit and the beneficiary, particularly under the current market circumstances.

 

Petrom CFO Reinhard Pichler says this transaction is an important moment in Petrom’s international financial operations. Despite the unfavourable conditions on the world financial markets, the transaction has been successfully completed thanks to a solid relation between Petrom/OMV Group and the participating banks, he adds.

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Process Management

Process Management refers to the application of knowledge, skills, tools, techniques and systems to define, visualize, measure, control, report and improve processes with the goal to meet customer requirements profitability.

The innovative side of the company

Petrom’s privatization in 2004 was critical for the company’s competitiveness and sustainable development. In 2005 Petrom embarked on a restructuring and modernization program throughout all business segments. In 2010, they marked 4 years of successful track record in restructuring and modernization with the following main achievements:

Exploration and Production

  • Successful efforts to ...

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