ROMPETROL’S TURNAROUND OF
THE PETROMIDIA REFINERY
A Case Study in Sour Crude Processing in the
Black Sea
CERA—East Meets West
Istanbul, June 29, 2005
1
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
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The Rompetrol Group Profile
Largest Romanian group of private companies (2004 gross
revenues of $1.61 billion), representing almost 7% of state
budget revenues and 3% of GDP
32% share of Romanian refined products market
Domiciled in the Netherlands with worldwide operations and
assets (though mostly in Romania)
Owned by management
Financed principally by international banks; audited to IAS
standards
Mostly active in refining and marketing in the Balkans
One of the country’s largest exporters and taxpayers ($635
million in tax payments in 2004)
Core asset is 4.8 mta. (nameplate) capacity Petromidia refinery
north of Constanta
Listed on BSE since April 2004; market capitalization over $500
million; 20% weight in local index
3
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
1998 to 2000 - Series of synergistic acquisitions;
private equity investment
2001 to 2003 – Restructuring of management,
technology, finances and operations of
associated companies; strategic investment by
OMV (25.1%)
2004 to 2006 – Becoming a large integrated regional
low-cost producer of refined products;
disinvestment of OMV and access to capital
market
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Petromidia Privatization Attempts
Complexul Petrochimic Midia Navodari (the first name of Rompetrol Rafinare S A) was one
of the large oil refining plants which were built after 1975
In 1991, the entity was changed into a stock company which took 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
sale/purchase agreement for 65.323% in Petromidia’s share capital to 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
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Rompetrol Rafinare
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The turnaround of Rompetrol Rafinare
Old Petromidia New Petromidia
State owned Privately owned
Listed on RASDAQ $6mil Listed on BSE with $500+ mil
market cap market cap
Financed by traders Financed by western banks
Sweet crude slate Sour crude slate
Low capacity utilization High capacity utilization
(<1mta) (>3mta)
Highly indebted and with Reasonable leverage (e.g.,
historical tax arrears 40%)
Overstaffed (3600) Automation brings a smaller
staff (1200)
Unprofitable Profitable
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The turnaround of Rompetrol Rafinare
Crude Supply - considerations
Brent vs. Urals 2001-2005 Brent (Dtd) Urals (Med)
$60
$55
$50
$45
$40
USD/bbl
$35
$30
$25
$20
$15
$10
Jan-01 A pr-01 Jul-01 Oct-01 Jan-02 A pr-02 Jul-02 Oct-02 Jan-03 A pr-03 Jul-03 Oct-03 Jan-04 A pr-04 Jul-04 Oct-04 Jan-05 A pr-05
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The turnaround of Rompetrol Rafinare
Refinery Run
Used Capacity Unused Capacity Max.Capacity
5.00
Million mt / year
4.00
3.00
2.00
1.00
-
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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The turnaround of Rompetrol Rafinare
Feedstock - Product Quality
Sweet Crude Sour Crude
Non-Euro Products Euro Standard Products
5.00
Million mt / year
4.00
3.00
2.00
1.00
-
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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The turnaround of Rompetrol Rafinare
Refinery Staff
4,000
3,500
No.of employees
3,000
2,500
2,000
1,500
1,000
500
-
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
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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
0
2001 2002 2003 2004
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The turnaround of Rompetrol Rafinare
Gross revenues EBITDA Net profit
2,000 1,774
1,444
1,500
1,077 1,138
1,000 701
407
500 287
86 11 122 71
16
0
-10 -23 -75 -35 -74 -350
-500
2000 2001 2002 rest 2003 2004 2005
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Structure of Romanian Oil Industry—Survival of 4 out of
5 Name of Capacity (mta) Governance
Refinery
Nameplate 2003 Owner Audits Listing Banking
actual
Petrobrazi 3.5 2.8 Petrom Ernst BSE ING, ABN
(OMV 51%) & Amro, RZB,
Young Citibank,
BCR
Arpechim 3.5 2.7 Petrom Ernst BSE ING, ABN
(OMV 51%) & Amro, RZB,
Young Citibank,
BCR
Petromidia 4.8 3.3 TRG 79% Deloitte BSE HVB, RZB,
Float 21% & Citibank,
Touche BCR
Petrotel 3.8 0 Lukoil NYSE
100% KPMG Global
Rafo 3.5 2.4 Balkan none Financed
Petroleum unknown by oil
97% traders
Total 19.10 11.20
Entire Nation 23.00 13.29
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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
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What we are doing in response
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
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