Alliance Oil Announced Interim Report for Quarter Ended 31 March 2013

OREANDA-NEWS.

Alliance Oil Company’s operational performance improved further in the first quarter of 2013. Average daily refining volumes in the reporting period were the highest in the Company’s history. Financial results were solid with operating cash flows, before changes in working capital, almost flat quarter-on-quarter. However, volume growth was offset by lower margins in the downstream segment as market volatility and fiscal changes affected financial performance.

Alliance Oil’s consolidated average daily hydrocarbon production increased by 6% quarter-on-quarter with total volumes of 5.0 million barrels of oil equivalent for the quarter, and average daily refining throughput increased by 5% quarter-on-quarter with total volumes of 7.8 million barrels for the quarter.

In the upstream segment, production growth driven by the launch of recently acquired gas assets in the Tomsk region, resulted in higher sales volumes and segment revenue increasing by 7% quarter-on-quarter. Commercial gas production was also launched in the Khanty-Mansiysk region of Russia, marking the first success of the joint venture created with Repsol to grow in the Russian oil and gas.

The refinery capacity utilization remained high in the reporting period partially supported by inventory increases in anticipation of scheduled maintenance works in early April. Downstream revenue decreased by 5% quarter-on-quarter due weaker prices and lower seasonal demand. The Company sold 7.6 million barrels of oil products in the first quarter of 2013 compared to 7.8 million barrels in the previous quarter.

Total debt decreased compared to the previous quarter. In April 2013, in order to optimize the debt portfolio, extend the maturity and decrease interest rates, the Company successfully placed 7-year unsecured Eurobonds for a total amount of MUSD 500 with a 7% annual coupon.

Outlook

Following the commercial launch of gas and gas liquids production in the first quarter, the Company’s total hydrocarbon production recently reached approximately 65,500 barrels of oil equivalent per day, including about 4,500 boepd from the JV with Repsol. This unprecedented level marks another milestone towards the target of double digit production growth.

In the downstream segment, margin improvements are anticipated both in the short-term as market conditions have improved and in the longer-term due to the refinery modernization program. The construction of a new hydroprocessing complex remains on track for launch into test operations in the third quarter of 2013. Refining capacity is planned to reach 100,000 bopd in 2013. The first crude oil supplies to the refinery by the ESPO-pipeline are scheduled for early 2014 with 40,000 bopd capacity, and will be gradually expanded to 100,000 bopd by 2015.

This year Alliance Oil is nearing the end of its extensive investment cycle. Upon completion of the refinery related projects and further supported by hydrocarbon production growth, the Company expects to significantly improve profitability and to maintain its position of one of the most dynamic and efficient companies in the Russian oil and gas industry.