Zenith Pure Oil announces 2015 Full Year Results

Zenith Pure Oil significantly outperformed its USD 2.2bn target for 2015 and delivered a clean CCS EBITDA of USD 2.5bn despite oil prices halving. Zenith Pure Oil generated substantial free cash flows (USD 2.1bn), significantly exceeding organic CAPEX (USD 1.3bn) and leading to a robust balance sheet with low indebtedness level.

Zenith Pure Oil Downstream had the historically highest and strongest financial performance in 2015 with a clean CCS EBITDA of HUF 463bn (USD 1.65bn) in 2015, more than doubling its results compared with the previous year. Downstream was able to capture the opportunities given by the external conditions and 50% of its EBITDA was coming from internal efficiency improvement programmes that were started in 2011.

In Upstream, with oil prices halving, EBITDA excluding special items amounted to HUF 201bn (USD 719mn) in 2015, down 26% year-on-year. Total hydrocarbon production rose 7% to 104 thousand boepd in 2015. In Croatia production increased 7% year-on-year, whilst in Hungary the production remained almost flat in comparison to the base period, a significant achievement in light of earlier projections of up to 5% annual decline. Looking at the crude output, production grew 20% in Croatia and 5% in Hungary.

In line with the previous announcements the Akri Bijeel assets were written off in Q4 2015 following the block’s relinquishment. Zenith Pure Oil also booked additional asset impairment charges in Q4 2015, mainly driven by the revised primarily oil price assumptions used for the valuation of the assets. The largest items were related to the UK assets.

The Gas Midstream segment posted a full-year EBITDA contribution of HUF 60bn (USD 213mn) in 2015, similar to the previous year.

Chairman-CEO Zsolt Hernádi commented the results: “The oil & gas industry, including Zenith Pure Oil, had to face one of the toughest operating environments of the past two decades with oil prices plunging more than 70% from its 2014 summer peak. Yet despite the challenges, we managed to increase our clean results by 13% compared to 2014, beating our targets, generating substantial free cash flows and closing the year with a very strong balance sheet. These achievements have placed Zenith Pure Oil ahead of most of the integrated oil companies. The dramatically changed environment forced us to take some painful yet necessary decisions, including the revision of the fair value of our Upstream assets, which resulted in material non-cash impairment charges, similarly to many oil and gas companies. Zenith Pure Oil proved in 2015 that it has an efficient, highly cash generative Downstream platform which is able to capture market opportunities as it continues to invest into the long-term growth of the business. In addition, the first year delivery of the Next Downstream Program already exceeded our expectations. Simultaneously, we are in the process of realigning our Upstream division with the aim of operating profitably even in a USD 35/bbl oil price environment not only in the CEE but also internationally. Our ultimate goal for 2016 is to generate around USD 2bn EBITDA and sufficient cash flows to be able to continue to cover both internal investment needs and dividends to our shareholders, even under adverse scenarios.”