Transcript EU ACCESSION AND MARKET LIBERALIZATION

ROMPETROL’S SUCCESS
STORY
ENERGY—Romania’s Forum on Oil, Gas and Energy
Bucharest, June 16, 2005
Table of contents
 The Rompetrol Group Profile
 Rompetrol History
 Privatization Attempts
 The Turnaround of Rompetrol Rafinare
 Structure of Romanian Oil Industry
 Difference between Rompetrol Rafinare and others
 Investigation into privatization procedures
The Rompetrol Group Profile
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Largest Romanian group of private companies (2004 gross
revenues of $1.61 billion), representing almost 7% of State
Budget revenues
Covers 32% share of Romanian refined products market
Domiciled in The Netherlands with worldwide operations and
assets (though mostly in Romania)
Owned 100% by management
Financed principally by international banks; audited to IAS
standards
Active in upstream, refining, marketing and services
One of the country’s largest exporters and taxpayers ($635
million in tax payments in 2004)
The Rompetrol Group Profile
 Achieved a landmark agreement with MOF in 4Q 2003
rescheduling historic tax liabilities
 Our online Investor Relations center (at
www.rompetrol.com) provides transparent information on
company operations via our 2003 and 2004 Annual
Reports, management presentations and a White Book on
the 3-year post-privatization history of the Petromidia
refinery
 Our largest subsidiary, Rompetrol Rafinare SA, was
listed on the Bucharest Stock Exchange on April 7th, 2004
and broke all trading records (and the IT system!) on the
first day
Rompetrol – History
1974 - Established as the international operator of the
Romanian oil industry
1993 - Privatized by Management and Employee Buy Out
(“MEBO”) and turnover subsequently reduced to below
$6 million by 1998
1998 - Control purchased by Dinu Patriciu and local
investor group
1999 – Holding company established as The Rompetrol
Group (‘TRG’) in the Netherlands
1999 – First major acquisition. The Vega refinery –
located in Ploiesti – is bought and doubles its
revenues in the first nine months after take-over
History – cont’d
2000 - Private equity investment by US-managed
Romania & Moldova Direct Fund, L.P.
2000 – Rompetrol takes over Petros – at that time
Romania’s principal oilfield operator. The company
has since been renamed Rompetrol Well Services,
which is now listed on RASDAQ, Romania’s OTC
market.
2001 – The Group’s largest acquisition, Petromidia
S.A., is also Romania’s largest and most
sophisticated oil refinery. Rompetrol committed
itself to a sustained modernization process to
make Petromidia a state-of-the-art facility in
Eastern and Central Europe
History – cont’d
2001 – Rompetrol creates Rominserv, Romania’s first
Engineering Procurement Construction & Maintenance
(EPCM) company focusing on the oil industry.
2002 – OMV of Austria buys 25.1% of TRG NV; RMDF
exits; OMV Chairman Dr. Wolfgang Ruttenstorfer joins
TRG Board.
2002-2003 – Rompetrol opens subsidiaries in
neighboring Republic of Moldova (Rompetrol Moldova)
and Bulgaria (Rompetrol Bulgaria)
2004 – OMV takes over Petrom and sells its 25.1%
stake in TRG back to management
2005 - Most significant Q1 results ever with net profit
reaching $43 million. Rompetrol starts operations in
Albania and opens a representative office in Moscow
Privatization Attempts
 Complexul Petrochimic Midia Navodari (the first name of Rompetrol Rafinare S.A) was one of
the large oil refining plants which appeared after 1975
In 1991, the entity was changed into a stock company by taking over all of the assets of the
former unit.
The Romanian Government attempted three privatizations of Petromidia
The first attempt was carried out in 1997 when the State Ownership Fund (SOF) had
discussions with Daewoo, Glencore and Petromidia USA
The second effort was made over July 1998 - January 1999 and resulted in a sales/purchase
agreement for 65.323% in Petromidia’s share capital with Turkish investor Akmaya
Due to the disagreements between the Romanian authorities and Akmaya regarding the
additional incentives the Government re-slated the sale of a controlling interest in Petromidia
In a third effort, SOF concluded an agreement with the Rompetrol Group N.V. on 31 October
2000. Actual transfer of the stake was subsequently performed on 26 January 2001
The turnaround of Rompetrol Rafinare
Crude Supply - considerations
Brent vs. Urals YTD 2005
Brent (Dtd)
Urals (Med)
$65
$60
USD/bbl
$55
$50
$45
$40
$35
$30
$25
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05
The turnaround of Rompetrol Rafinare
Types of crude used
Avg. Q1 Crude prices - 2004 vs. 2005
Brent Dtd
Crude Oil Prices
Urals Med
Differential
$4.42
2005
$43.28
$47.70
$3.02
2004
$-
$29.00
$32.03
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
The turnaround of Rompetrol Rafinare
Evolution of MTBE % in unleaded gasoline
% MTBE
14
13.148
12
10
8.488
8
6.884
7.297
6
4
2
0
2001
2002
2003
2004
The turnaround of Rompetrol Rafinare
Production – 100% sour crude into 100% euro standard fuels
Products
Euro Products
Sweet Crude
Sour Crude
Structure of Romanian Oil Industry—Survival of 3 out of 5
51% OMV
80% Dinu Patriciu
TRG
20% Phil Stephenson
Difference between Rompetrol Rafinare and others
 RRC is a public company listed on the BSE and the ROTX Vienna Index
RRC discloses all ultimate beneficial owners
 RRC has net profits as of Q4, 2004 and Q1, 2005
 RRC financial results are audited by international independent auditors
 RRC covers 32% of the refining market share in Romania
 RRC has open and transparent supply contracts for crude imports
 RRC is backed mostly by international banks which finance its activity
 RRC has expanded its exports and activity regionally
RRC meets EU quality and environmental standards
Investigations into privatization procedures
 Interest groups are still active in Romania and
receive strong political backing
 PNA investigation started and ended last year—
charges were rejected and sent for investigation to
the General Prosecutor’s Office
 The General Prosecutor’s Office has launched an
investigation into the privatization of Petromidia
 Although we suspect the initiation of the
investigation was politically motivated, Rompetrol will
cooperate fully with the prosecutors all through the
process, which we hope will be:
 Professional
 Expeditious
 Apolitical
 Conclusions expected to vindicate the Rompetrol
Group and also to disarm special interest groups
What we are doing to defend ourselves
 To prove our innocence we have been cooperating with prosecutors
and provided documents and answers that show no wrongdoing
 Rompetrol retained the services of a team of local and international
attorneys including international law firm Salans
 Rompetrol shareholders brought forth to the public attention the lack
of due process in conducting the investigation
 Local and international media and civil society have rallied in support
of principles such as presumption of innocence, fair and quick due
process free of political or economic interference
 Rompetrol shareholders are considering international legal action to
defend investments made in the company
 Rompetrol welcomes a swift and independent investigation conducted
with the observance of due process and respect for the justice process
 Rompetrol has posted documents, releases and media articles on its
website detailing the issues surrounding the inquiry
Why should you care
 Oil industry development in Romania moving away from old guard
to a new paradigm embodied by Rompetrol will allow business to
thrive and benefit all constituencies
 Maintain positive investor climate in light of forthcoming EU
accession
 Respect for the rule of law and true presumption of innocence as
part of the due process, to be followed
 Cooperation with civil society to defend human rights
 Prevent potential negative economic impact of justice does not
follow due process
 What happened to us can happen to anyone conducting business in
Romania unless structural reform is applied