PetroSA, South Africa's national oil company, records loss for the year
The Petroleum Oil and Gas Corporation of South Africa SOC Ltd. (PetroSA), has recorded a loss for the year of R1.4billion for 2016/17 (2016: R449 million loss).
The dwindling indigenous feedstock reserves and the operational challenges at the GTL plant resulted in revenue falling 34% on the previous year. Sales volumes were below expectations. The GTL plant and purchased product sales were 16% and 46% below forecast. The Ghana subsidiary’s performance was negatively impacted by the lower-than-average crude prices, as well as by an incident on a production vessel that interrupted output.
The Groups financial position remains an area for concern, as the total assets decreased to R17.1 billion from R20.9billion in 2016. The available cash balance decreased from R3.7 billion in 2016 to R2.4billion in 2017. The Group is ungeared when presented as a ratio of net debt (comprising gross debt net of cash and cash equivalents) to equity. The optimal funding structure for the Group has been considered, with a targeted long-term gearing ratio of 30% to 40%, in line with the Group’s long-term strategy and growth initiatives.
A net reversal of impairment (R1 billion) of assets contributed positively to the net operating loss. The reversal of impairment emanated largely from a decrease in the provision for future abandonment costs. The abandonment provision was revised downwards at year-end following a value engineering exercise. The increase in reserves from the Ghana subsidiary was another contributing factor.
PetroSA’s Acting Group CEO, Mr Kholly Zono, said the 2016/2017 financial year was one of the most difficult periods in the life of the company. There were, however, areas of excellence.
“Not only is our Ghanaian business a commercially viable investment, but the business also grows our crude reserves – an asset that can be leveraged to provide cash flow to sustain PetroSA” said Mr Zono.
On the issue of going concern, it is the considered opinion of the PetroSA Board that the Group and Company will continue to operate as a going concern for the foreseeable future. This opinion is informed by factoring in current cash balances (in excess of R2billion) and unutilized bank facilities and projected cash flows. Barring any unforeseen circumstances, PetroSA will be able to pay all of its debts as they fall due and payable for the foreseeable future.
“The Group is mindful of several exogenous factors that may negatively impact its financial performance in the future. These include international crude oil prices and foreign exchange volatility. Whilst these factors are not within the control of the Company, any further negative deterioration in these factors will impact the Group's profitability and place additional strain on the Group's financial resources. These financial risks are continually monitored and mitigated where appropriate.“ said Webster Fanadzo, the Acting Group CFO.
The new Interim Board expects the year ahead to be challenging. However, the new Interim Board is well geared to face such challenges. The primary focus for the Interim Board will be developing a strategy that will reposition the Company for growth whilst advancing deeper transformation and creating sustainable job security for employees.
The interim Chairman, Mr Nhanhla Gumede, said “We will ensure that we improve efficiencies and build synergies across the value chain, mindful of the importance to retain and build scarce skills. We are confident we can rebuild a strong PetroSA brand that inspires pride in all our diverse Stakeholders.”