Abu Dhabi National Energy Co., the state-controlled utility known as Taqa, swung to profit in the third quarter as operating costs and income taxes fell.
Net income was 146 million dirhams ($39.8 million), compared with a year-earlier loss of 288 million dirhams, the company said today in a statement to the Abu Dhabi stock exchange. Revenue declined 16 percent to 7.4 billion dirhams.
Taqa has stakes in businesses generating power and producing crude oil and natural gas in the Middle East, North Sea, India and North America. It expanded last year by adding oilfield operations in northern Iraq and buying U.K. crude deposits from BP Plc. Taqa cut costs last quarter mainly at operations in Canada, where gas prices have been below its expectations, Chief Financial Officer Stephen Kersley said.
“The price realizations in Canada are not where we’d hoped they’d be,” motivating the company to cut costs there, Kersley said in a telephone interview today. “We’ve done that by focusing our capital program and focusing it on the areas where we see most profitability.”
The utility cut operating costs by 38 percent to 3.3 billion dirhams, it said in the statement. Tax fell to 230 million dirhams from 767 million dirhams a year earlier.
Taqa, which won approval in October from authorities in Iraq’s semi-autonomous Kurdish region to develop a field there, shifted some staff from operations in Canada to areas including Iraq, Chief Executive Officer Carl Sheldon told reporters on a conference call today.
Revenue from oil and gas rose 35 percent to 3.45 billion dirhams on higher crude and gas prices, the company said. Power and water sales fell to 2.6 billion dirhams from 4.9 billion dirhams. Increased sales from oilfields in the North Sea helped boost revenue, Kersley said.
“In the North Sea, it’s been more a volume story than a price story,” Kersley said. A U.K. tax charge taken in the third quarter last year on Taqa’s assets there wasn’t repeated, helping boost profit, he said.
Gas on the New York Mercantile Exchange sold at an average of $3.55 per million British thermal units during the third quarter, compared with $2.89 per million BTU a year earlier, Taqa said. The quarterly average for European benchmark Brent crude rose 62 cents to $110.04 a barrel, Taqa said.
The company will keep capital spending at about $2 billion a year, Kersley said. Taqa is investing in the Atrush field in the Kurdistan region of Iraq with the aim of starting production in 2015, while it deferred any investment decision on a proposed coal-fired power plant in Turkey, Sheldon said. The company isn’t planning additional acquisitions and will focus on “digesting” the assets it bought in the North Sea, he said.
Taqa plans to refinance a $1.2 billion bond due next year by selling new debt within the next six months, Kersley said. He declined to comment further on bond pricing or potential timing for a sale. The company will use future cash flows from operations like the crude oil fields it acquired in the North Sea and Iraq to pay down future debt, he said.
“To the extent that we’ve got surplus cash coming in, that would be prioritized towards paying down debt as opposed to further investment,” Kersley said.