Lower refining margins due to higher crude oil prices cut the net profit of Oil Refineries Ltd. (TASE:ORL), despite higher revenue for the second quarter of 2011. Revenue rose 41% to $2.65 billion from $1.88 billion for the corresponding quarter of 2010. Refining revenue rose to $2 billion for the second quarter from $1.4 billion for the corresponding quarter.
Net profit fell 43% to $18.3 million for the second quarter from $32.3 million for the corresponding quarter. The company's adjusted refining margin fell to $1.40 per barrel in the second quarter from $4.60 in the corresponding quarter.
Oil Refineries completed the hook up to the national natural gas pipeline during the second quarter. However, it has not received natural gas from Egypt's East Mediterranean Gas Company (EMG), due to attacks on pipelines in Sinai. Oil Refineries contracted to buy 1.2 billion cubic meters of gas from Yam Tethys, owned by Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL).
Oil Refineries CEO Pinchas Buchris said, "The sharp rise in the price of crude oil, which reached levels last seen before the global crash of 2008, eroded the company's refining margin during the quarter. On the other hand, the company's margin in the first half of the year was consistently higher than the benchmark margin over the preceding 12 months. Petrochemicals sector sales for polymers were substantially higher."
In a separate development, Oil Refineries signed a power purchasing agreement with sister company OPC Rotem Ltd., owned by Israel Corporation (TASE: ILCO). OPC is building a power station. Oil Refineries also signed an agreement with another sister company, Zim Integrated Shipping Services Ltd., to provide fuel oil for its ships anchored at Haifa Port.
Oil Refineries share price rose 1.5% in morning trading to NIS 2.05, giving a market cap of NIS 4.9 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 15, 2011
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