Petrom 4Q 2010 results

In the segments, E&P was a positive surprise due to FX effects and enhanced production at nine fields in Western Romania. Additionally, new key wells were started and a successful acid stimulation campaign in offshore fields supported the production increase compared to the previous quarter. In Romania, 2010 replacement rate was 72% compared to 70% a year earlier. Refining suffered from one-off costs related to the closure of a tank farm at the Arpechim refinery. The big negative surprise in this segment, however, was the underperformance of marketing. Gas and Power fared better than expected as sales volumes grew 15% yoy on the back of a reawakening demand from the fertilizer industry in Romania. Petrom was able to reverse bad debt provisions of RON 70 mn, we had expected RON 27 mn. The financial result improved yoy as the last year's figures included a provision for interest charges relating to the tax review for Petrom. Ne profit for the quarter reached RON 781 mn, while in 4Q 2009 Petrom recorded a loss of RON 129 mn. We expect a positive market reaction based on the good result and confirm our 'buy' recommendation.