Petrom 3Q 2010 results

In the segments, E&P was in line (RON 956 mn), and R&M was a very positive surprise (RON 70 mn, compared to our calculation of RON 26 mn), most likely profiting from further cost cuts and an inventory valuation gain. However, G&P was decidedly worse than our prognosis at RON – 46 mn (we expected RON -11 mn) caused by provisions for bad debt to utilities and yoy lower gas sales volumes. This development resulted in a disappointing reported EBIT of RON 336 mn (RCB: RON 485 mn, consensus RON 790 mn) and to a reported net loss of RON -100 mn (RCB: RON 207 mn, consensus RON 421 mn). Clean CC net profit came in at RON 226 mn, also markedly lower than our calculation of RON 407 mn. Petrom's net debt stands at RON 3,376 mn (2Q 10: RON 2,697 mn), bringing gearing up to 19% (2Q 10: 15%). Capex were RON 990 mn (2Q 10: RON 1,269 mn). OCF was RON 352 mn (2Q 10: RON 1,289 mn).

We expect a negative market reaction on the results. Despite the good performance in R&M, which we expected, the losses in G&P and also in the financial result (FYX losses) wreak havoc among the figures more than we expected. We wait for further details in OMV's conference call at 11:30 CET.

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