Taqa trims capital expenditure by 73% in H1

abu dhabi - Energy giant achieves more than Dh6.5 billion in cash cost and capex savings

Abu Dhabi National Energy Company (Taqa) has trimmed its capital expenditure by 73 per cent in the first half of the year.

Taqa has achieved more than Dh6.5 billion in cash cost and capex savings under its cost transformation programme launched in 2015.

The energy giant reported a plunge of 21 per cent in revenue to Dh7.9 billion while it saw a decline of 39 per cent in realised oil and gas prices in the period, resulting in a net loss of Dh1.2 billion compared to a net loss of Dh165 million in the first half of 2015.

Net profit was also negatively impacted by the absence of the one-off Dh555 million UK tax credit booked in the first half of 2015.

Saeed Al Dhaheri, acting chief operating officer, said: "Our businesses have continued to demonstrate improving operational performance. Despite achieving significant cost reductions, including a 73 per cent cut in capex, we safely maintained oil and gas volumes and increased power production above our previous record highs."

The successful $1 billion bond refinancing reduced the company's annual corporate interest payments by Dh70 million.

"While our realised oil and gas prices dropped by 39 per cent, the upstream business has adapted to changes and continued to transform into a more resilient business able to compete in this tough environment," he said.

The proceeds will be used to repay the $1 billion bond due to mature in October this year, but more importantly will reduce financing costs by approximately Dh70 million per year.

As at June 30, 2016, the company's available cash, cash equivalent and undrawn credit facilities totalled Dh15.6 billion, up 14 per cent compared to the same period last year.

Despite continuing low oil and gas prices, free cash flow increased 35 per cent to Dh3.1 billion in the first half of 2016. The increase compared to the first half of 2015 was led by reductions in capital expenditure, cash costs and tax payments.

In the first half of 2016, the cost transformation programme reported a further 14 per cent of cash cost savings, equivalent to Dh458 million, driven primarily by efforts made across the oil and gas businesses.

The programme has now generated opex and G&A savings totalling over Dh2 billion over the last 18 months.

Capital expenditure for H1 2016 was reduced by Dh1.3 billion or 73 per cent compared to H1 2015. This was due to the completion of major projects in 2015 as well as cutting discretionary investment.

The company increased its power production by six per cent to a record high of 39,090 gigawatt hours while technical availability increased to 92 per cent.

Water volumes decreased slightly to 121,650 million imperial gallons due to planned maintenance. The higher availability is partly attributable to the optimisation of maintenance programmes throughout the fleet.

Despite significant cuts in capital expenditure, Taqa minimised the decline in production and produced 147,4000 barrels of oil equivalent per day, only two per cent less than in H1 2015.

- haseeb@khaleejtimes.com

• Abu Dhabi