Germany: RWE Dea Announces Significant Increase in 2010 Earnings

RWE Dea AG, Hamburg, is on a positive course: in fiscal 2010, the company boosted its earnings by 50 per cent. The operating result amounted to 305 million euros in the year 2010 (2009: 203 million euros).

“This surge in earnings is attributable to a significant recovery of the market environment,” explained Thomas Rappuhn, Chief Executive Officer of RWE Dea AG, at today’s annual press conference in Hamburg. “For 2011, we assume that prices will rise and that we will once again generate an improved operating result,” Rappuhn continued. The production of oil and gas is to be increased considerably by developing reservoirs speedily in the next several years.

Positive factors are the higher oil price, foreign currency results as well asthe better exploration result. These aspects compensated for the influence of the natural production decline and lower gas prices. “We managed to achieve our results as planned,” Chief Financial Officer Johannes Karlisch emphasised. “Our success today is a key prerequisite for our future growth.” Earnings before taxes were up by one third, to reach 280 million euros (2009: 204 million euros). Earnings after taxes doubled to reach 108 million euros. Sales revenues amounted to 1,489 million euros in fiscal 2010, slightly exceeding the previous year’s level.

Further expansion in reserves and resources

In total, RWE Dea has additionally extended its reserves and resources (discovered) for withdrawal from current production by some 5 million cubic metres of oil equivalents, to roughly 228 million cubic metres of oil equivalents. The expansion of resources is the result of highly successful exploration activities. RWE Dea reports that the average success rate for exploration and appraisal well over the last six years is 55 per cent, a figure well above the industry average. Reserves increased to 137 million cubic metres of oil equivalents. The conversion from resources to reserves within a field is carried out once a decision has been taken in the course of field development work. In this way, 52 million cubic metres of oil equivalents were converted from resources to reserves in the Egyptian western Nile delta in July alone. “In addition, we acquired extensive new proven resources thanks to successful exploration and reappraisal activities,” to Baben explained.

RWE Dea succeeded in extending the portfolio in 2010 with concession holdings and new licences. “In doing so, we created the basis for future growth”, explained Rappuhn. “We meanwhile have a presence in fourteen countries, with stakes in over 170 licences; for about 40 per cent of these, we act as operator.”

Further increase in size of workforce

RWE Dea increased the size of its workforce for the seventh year in succession. Compared with the end of 2009, the number of employees grew by six per cent, to 1,363 employee equivalents. Rappuhn stressed: “In Hamburg alone, we have increased the size of our workforce by more than 50 per cent over the last years, creating more than 220 new and challenging jobs in the process.”

Consistent field development and strong growth targeted

RWE Dea will continue to implement its targeted growth strategy consistently and boost production, earnings and key financial ratios significantly. Production is already to increase slightly in 2011, after which it will be expanded substantially following the gradual implementation field development projects that have already been started. In this context, the core region of Europe will initially play a particularly important role followed by northern Africa . RWE Dea plans to boost its annual gas and oil production to more than 70 million barrel of oil equivalents by 2016 and to more than double its production volume compared with the year 2010. To this end, in the next three years RWE Dea will have an average of 1.1 billion euros in capex funding available.

An important prerequisite to implement the ambitious goals is a well-trained and dedicated workforce. With their specialised know-how, these employees will proactively work towards driving the objectives of the growth company RWE Dea and make a key contribution towards the projects and goals of the RWE Group.

By means of precise selection and focusing on cost issues in implementing new projects along with a well balanced international portfolio, RWE Dea plans to generate an operating result of one billion euros as early as the year 2016. Since a consistent policy of cost optimisation is already under way, RWE Dea assumes that it will generate another substantially improved operating result for 2011. For the years after that, the company plans to achieve further increases. Double-digit growth rates are anticipated for the next several years. The expansion of oil and gas production has a high status for the RWE Group.

Earnings benefit from higher crude oil prices

In the wake of the considerable stabilisation of the global economy, crude oil prices saw a market recovery in the year 2010. A barrel of Brent was traded at 79.5 U.S. dollars on an annual average. This represents an increase of 18 U.S. dollars year-on-year (+29%). At 20.4 €-cents per cubic metre, the average natural gas price realised by RWE Dea was 7 per cent below the level of the previous year (21.9 €-cents).

Oil production at previous year’s level, lower production of natural gas

In 2010, RWE Dea produced 2.8 billion cubic metres of gas and 2.3 million cubic metres of crude. Converted into oil equivalents, total production amounted to 5 million cubic metres, slightly down on the previous year’s level. Owing to the natural production decline in Germany and the United Kingdom, gas production witnessed a slight decrease. Oil production remained at the previous year’s level.

Investments remain at a high level

Capex investments were high once again at 507 million euros. The company largely managed to fund these investments from its operational cash flow. The primary focus of investment, two-thirds of the total volume, was on the core region of Europe: in Norway, investments were made above all in the Gjøa project and in successful exploration activities. Substantial funding was also assigned to the British field development projects Breagh, Clipper South and Devenick as well as the German production locations. One third of investments went to northern Africa: in particular to Egypt for successful exploration work, into production enhancement measures in the Gulf of Suez and into early field development activities. “In the year 2010, we managed to bring our large development projects forward, laying key foundations for our future in the process,” said Chief Operating Officer Ralf to Baben.

[mappress]

Source:RWE Dea , April 6, 2010;