Interim report for the quarter ended 31 March 2013

• Revenue of MUSD 882.3 (Q1 2012: MUSD 815.1).
• EBITDA of MUSD 150.8 (Q1 2012: MUSD 217.8).
• Profit before tax of MUSD 63.7 (Q1 2012: MUSD 177.4).
• Profit for the period of MUSD 44.1 (Q1 2012: MUSD 139.7).
• Transactions completed to form joint venture with Repsol.
• Launch of gas production in Tomsk region and Khanty-Mansiysk region.

Subsequent events

• Eurobond offering raised MUSD 500 in April 2013.
• In April, oil and gas production increased to 65,465 boepd[1].

[1] 60,825 boepd constituted consolidated production and 4,640 boepd constituted equity interest.

Dear Shareholders,

Alliance Oil Company’s operational performance improved further in the first quarter of 2013. Average daily refining volumes in the reporting period were the highest in the Company’s history. Financial results were solid with operating cash flows, before changes in working capital, almost flat quarter-on-quarter. However, volume growth was offset by lower margins in the downstream segment as market volatility and fiscal changes affected financial performance.

Alliance Oil’s consolidated average daily hydrocarbon production increased by 6% quarter-on-quarter with total volumes of 5.0 million barrels of oil equivalent for the quarter, and average daily refining throughput increased by 5% quarter-on-quarter with total volumes of 7.8 million barrels for the quarter. 

In the upstream segment, production growth driven by the launch of recently acquired gas assets in the Tomsk region, resulted in higher sales volumes and segment revenue increasing by 7% quarter-on-quarter. Commercial gas production was also launched in the Khanty-Mansiysk region of Russia, marking the first success of the joint venture created with Repsol to grow in the Russian oil and gas.

The refinery capacity utilization remained high in the reporting period partially supported by inventory increases in anticipation of scheduled maintenance works in early April. Downstream revenue decreased by 5% quarter-on-quarter due weaker prices and lower seasonal demand. The Company sold 7.6 million barrels of oil products in the first quarter of 2013 compared to 7.8 million barrels in the previous quarter.

Total debt decreased compared to the previous quarter. In April 2013, in order to optimize the debt portfolio, extend the maturity and decrease interest rates, the Company successfully placed 7-year unsecured Eurobonds for a total amount of MUSD 500 with a 7% annual coupon.

Outlook

Following the commercial launch of gas and gas liquids production in the first quarter, the Company’s total hydrocarbon production recently reached approximately 65,500 barrels of oil equivalent per day, including about 4,500 boepd from the JV with Repsol. This unprecedented level marks another milestone towards the target of double digit production growth.

In the downstream segment, margin improvements are anticipated both in the short-term as market conditions have improved and in the longer-term due to the refinery modernization program. The construction of a new hydroprocessing complex remains on track for launch into test operations in the third quarter of 2013. Refining capacity is planned to reach 100,000 bopd in 2013. The first crude oil supplies to the refinery by the ESPO-pipeline are scheduled for early 2014 with 40,000 bopd capacity, and will be gradually expanded to 100,000 bopd by 2015.

This year Alliance Oil is nearing the end of its extensive investment cycle. Upon completion of the refinery related projects and further supported by hydrocarbon production growth, the Company expects to significantly improve profitability and to maintain its position of one of the most dynamic and efficient companies in the Russian oil and gas industry.

Arsen Idrisov, Managing Director

For further information:

Arsen E Idrisov, Managing Director, Alliance Oil Company Ltd, telephone +7 (495) 777 18 08.

Eric Forss, Chairman of the Board, telephone +46 8 611 49 90.

Conference call

Date: Wednesday, 22 May 2013
Time: 10.00 CET

To participate in the conference call you may choose one of the following options:

Telephone

Dial one of the following numbers a few minutes before the conference starts:

Conference ID: 4620116

Web

The conference call will be webcasted live at www.allianceoilco.com.  

A replay of the conference call will be available at www.allianceoilco.com. 

Alliance Oil Company Ltd is a leading independent oil company with vertically integrated operations in Russia and Kazakhstan. Alliance Oil has substantial oil and gas reserves and downstream operations that include the Khabarovsk refinery and the leading network of gas stations and wholesale oil products terminals in the Russian Far East. Alliance Oil's depository receipts are traded on the NASDAQ OMX Nordic under the symbol AOIL.