Interim report for the quarter and six months ended 30 June 2013

Quarter ended 30 June 2013

• Revenue of MUSD 906.6, up 11% from Q2 2012.
• EBITDA of MUSD 173.1, up 30% from Q2 2012.
• Profit before tax of MUSD 59.3, up 102% from Q2 2012.
• Currency exchange loss of MUSD 19.8 negatively affected profit before tax.
• Profit for the period of MUSD 40.0, up 108% from Q2 2012.
• Eurobond offering of MUSD 500 completed in May 2013.
• Preference shares issue raised MUSD 100 in June 2013.

Six months ended 30 June 2013

• Revenue of MUSD 1,788.9, up 10% from six months 2012.
• EBITDA of MUSD 324.0, down 8% from six months 2012.
• Profit before tax of MUSD 122.9, down 41% from six months 2012.
• Profit for the period of MUSD 84.1, down 47% from six months 2012.
• Transactions completed to form joint venture with Repsol.
• Launch of gas production in Tomsk region and Khanty-Mansiysk region.

Dear Shareholders,

Alliance Oil Company demonstrated solid financial and operational performance in the second quarter of 2013. The macro environment remained supportive despite a slight decrease in international crude prices and depreciation of the RUB against the USD. Consolidated Revenue and EBITDA grew by 3% and 15% respectively compared to the previous quarter. Net income was negatively affected by currency exchange losses. Consolidated daily production of hydrocarbons increased by 11% quarter-on-quarter, as the Сompany recorded its first full quarter of gas operations, following the production launch in February. Refining volumes were almost flat in the reporting period.

In the upstream segment, production growth was primarily driven by gas and gas liquids in the Tomsk and in the Khanty-Mansiysk regions. Total production, including non-consolidated equity interests, increased by almost 16% quarter-on-quarter.

In the downstream segment, the refinery average daily run-rate remained near capacity despite the scheduled maintenance works in April 2013. The Company sold 8.3 million barrels of oil products in the second quarter of 2013 compared to 7.6 million barrels in the previous quarter. The downstream segment’s margin recovered quarter-on-quarter.

During the quarter the Company successfully placed 7-year unsecured Eurobonds for a total amount of MUSD 500 and Preference shares for a total amount of almost MUSD 100. While total debt increased, the net debt to EBITDA ratio improved from 2.7 in the first quarter to 2.5 in the reporting period.

Outlook

In July 2013 the total hydrocarbon production reached 67,200 barrels of oil equivalent per day, including about 5,300 boepd from the joint venture with Repsol. The Company is well on track to meet its double digit production growth target this year supported by the expanding gas operations and the development of joint venture operations. 

In the downstream segment, the market environment is traditionally strong. In July, the refinery run-rate exceeded 95,000 bopd and remains near these levels. Despite high demand for oil products, the unprecedented water flooding in the Russian Far East might affect the sales volumes and operational performance in the current quarter.  

The Khabarovsk refinery modernisation program is in the final stages with several new units near completion and scheduled for testing in coming months. The actual progress in the construction works during this summer and weather related issues will somewhat postpone the launch dates for the hydroprocessing complex and the connection to the ESPO-pipeline. Currently the modernised refinery and ESPO connection are still expected to be fully tested and operational early next year.

The completion of the refinery modernisation project and the ESPO connection mark the end of the current investment cycle through which Alliance Oil has significantly upgraded the foundation for operating in the Far Eastern oil products markets.

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, 21 August 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: 4636177

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.