Petrol Ofisi. Company Presentation. May 2009

Transcription

1 Petrol Ofisi Company Presentation May 2009

2 Disclaimer Petrol Ofisi A.Ş. ( Petrol Ofisi ) has prepared this presentation (the Presentation ) for the sole purpose of providing information relating to Petrol Ofisi (the Information ). The contents of this Presentation is based on public information and on data provided by Petrol Ofisi management. No reliance may be placed for any purposes whatsoever on the Information contained in this Presentation or on its completeness, accuracy or fairness. The Information in this Presentation is subject to verification, completion and change. No representation or warranty is made by Petrol Ofisi or the Shareholders or any of their respective advisers or any of their representatives as to the accuracy or completeness of the Information and no liability is accepted by any such person for any such Information or opinion or for any loss howsoever arising from any use of this Presentation or the Information. This Presentation and/or the Information is confidential and cannot be copied, disclosed or distributed to any person and is being provided to you solely for your information. This Presentation and/or the Information cannot be distributed or disseminated into Turkey. This Presentation and/or the Information do not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Petrol Ofisi, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. In the UK this Presentation is being made only to and is directed at (a) persons having professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (the Order ) or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order (all such persons together being referred to as relevant persons ). Any person who is not a relevant person should not act or rely on this Presentation or any of its contents. Investors and prospective investors in securities of any issuer mentioned herein are required to make their own independent investigations and appraisal of the business and financial condition of such company and the nature of the securities. Any decision to purchase securities in the context of a proposed offering of securities, if any, should be made solely on the basis of information contained in an offering circular published in relation to such an offering. All statements other than statements of historical facts included in this Presentation, including, without limitation, those regarding our financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to our products), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements in this Presentation speak only as at the date of this Presentation. 2

3 Table of Contents Introduction Turkish Energy Sector Company Overview Business Lines Future Story Sales Analysis Financial Overview 3

4 A New Playing Field Deregulation and Price Liberalization New Petroleum Market Law Increasingly Controlled Environment New Rules New Playing Field Obligation to hold a license Import liberalization National marker Distributor marker Fully accredited laboratories Station automation 20 day national stock obligation Vertical integration is allowed Market share of a distributor < 40% Increased levels of competition triggering consolidation Number of players increased from 21 as of YE04 to 45 as of YE08 Illegal fuel trading has considerably diminished The sector as a whole became more conscious of legal obligations Compliance had to be placed on the top of the agenda The leader of the sector took the lead in the new playing field Petrol Ofisi supported the new regulation from day one The Company was constantly in dialogue with the regulatory bodies communicating the difficulties and the problems the sector was coping with 4

5 Market Snapshot REFINER 1 refiner 4 refineries 24.2 mn tons of crude processed, 86.1% CUR 22.8 mn tons of production 26.0 mn tons of total sales 19.9 domestic 6.1 export DISTRIBUTOR 51 distributors Top 5 accounting for 85% of the market 4.2 mn m 3 of storage capacity stations 12,395 stations Dealer owned Dealer operated No white flags Dealer contracts recently limited down to 5 years PRICING 66% of the gasoline pump price is composed of tax (SCT+VAT) Adjusted in line with refinery prices & currency fluctuations Gasoline US$1.81/lt Diesel US$1.48/lt 5

6 Best Player in the New Playing Field - Widest Network, Highest Market Shares Leading Energy Force Owing to its Extensive Distribution Network, Innovative Product Offerings and High Quality Service Diesel Market Share 76% 59% 29% 30% 30% Gasoline Market Share 69% 46% 20% 24% 25% Number of Distribution Co PO Sales Volume * 6.86 mn tons of fuel products 8.25 mn tons of fuel products 6.51 mn tons of fuel products 6.01 mn tons of fuel products 6.17 mn tons of fuel products Number of PO Stations n.a. 5,424 4,500 3,300 3,223 Source: GDPA for , Petroleum Industry Association for 2007 and 2008 * Gasoline + Gasoil + Kerosene+ Black Products 6

7 Table of Contents Introduction Turkish Energy Sector Company Overview Business Lines Future Story Sales Analysis Financial Overview 7

8 Turkey, a Gateway to the Major Global Sources of Energy A bridge bridge between between east east and and west, west, connecting connecting the the leading leading energy energy suppliers suppliers and and consumers consumers Oil Pipelines Kirkuk Ceyhan Iraq s largest export line 50 million tons capacity per annum Baku Tbilisi Ceyhan Decreasing transportation and financial costs 50 million tons capacity per annum Ünye Ceyhan Ceyhan to become energy hub with new refineries and pipelines 70 million tons capacity per annum Natural Gas Pipelines Nabucco Major alternative route for gas to EU to be partially operational by 2013 with an initial pipeline capacity up to 8 bcm Construction will end in 2017, when the maximum capacity will reach 31 bcmy Turkey Greece Italy Turkey Greece part became operational in December 2007 Undersea link between Italy and Greece will be ready by 2012 Estimated capacity: 13 bcm per annum 8

9 Energy Sector: Changing Composition of Consumption Considerable Considerable increase increase in in oil oil demand demand despite despite the the significant significant share share lost lost to to natural natural gas gas 100% 80% Oil Demand (mn ton) 60% 20 40% 15 20% % Oil Gas Coal Hydro Turkish primary energy consumption reached mn tons with 5.0% increase in 2007 Natural gas had the leading share in energy consumption in 2007 with 31.1%, followed by oil with 30.6% and by coal with 30.5% share In 2007, natural gas consumption rose by 15.3% while oil consumption incresed by a mere 1.5% CAGR of oil consumption for the period has been 2.0% compared to 23.4% CAGR of natural gas Source: BP Statistical Review of World Energy

10 Insufficient Domestic Refining Capacity Gap Gap between between the the domestic domestic refining refining capacity capacity and and demand demand is is expected expected to to grow grow in in time time 2008 figures have not been released yet but market is expected to slightly contract in 2008 and 2009 In 2007, Turkey consumed 31.1 mn tons of fuel products The local refiner, Tüpraş, supplied 19.9 mn tons of this demand, the remaining 11.2 mn tons was imported In 2020, the demand which can not be met by Tüpraş production will reach 17.4 mn tons mn ton Turkey Fuel Products* Demand Demand* Production * White Products+Black Products+LPG+Lubricants+Asphalt +Naphta+Others Source: Petroleum Industry Association, TUPRAS and Petrol Ofisi 10

11 Market is Expected to a CAGR of 3.3% between Rapid Rapid economic economic expansion, expansion, demographics demographics and and EU EU convergence convergence are are the the main main drivers drivers of of growth growth In 2008, the overall market demand for fuel products that PO distributed* was 22.3 mn tons This demand is expected to rise to 32.8 mn tons in 2020 The production capacity will stand around 20 mn tons unless new refining capacity is introduced In 2020, 40% of the domestic demand will have to be met through imports mn ton Market* Demand Gasoline Diesel Jet Fuel Heating Oil Fuel Oil Auto LPG * Excludes Bulk LPG, Cylinder LPG, Lubricants, Asphalt, Naphta and Others Source: Petroleum Industry Association and Petrol Ofisi 11

12 Incompatible Supply and Demand Structures The The country country is is short short in in diesel diesel vs. vs. long long in in gasoline gasoline and and black black product product markets markets The domestic refining output mix does not match the demand composition of Turkey The country is short in diesel vs. long in gasoline and black products markets In 2008 alone, Turkey* imported 7.9 mn tons of diesel Diesel (mn ton) Gasoline (mn ton) Exports 0.56 Exports Imports Imports Net Exports Net Exports Source: EMRA * TUPRAS and distributors 12

13 Market Dynamics and and prove prove to to be be trend trend reversing reversing years years Diesel (mn m 3 ) Gasoline + Auto LPG (mn m 3 ) CAGR: 5.1% CAGR: -1.4% % % Q08 1Q Q08 1Q09 Black Products (mn ton) Aviation* (mn m 3 ) 5.9 CAGR: -11.0% % CAGR: 7.2% % Q08 1Q Source: Petroleum Industry Association for Gasoline, Diesel, Black Products and LPG Association for Auto-LPG * Company estimate between , starting from 2009, the Company can no longer provide market information with respect to jet fuel sales 13

14 Market Volume Composition Economic Economic slowdown slowdown took took its its toll toll on on fuel fuel consumption, consumption, whereby whereby white white volume volume (gasoline (gasoline + diesel) diesel) has has shrunk shrunk by by 4.9% 4.9% in in 1Q09 1Q09 1Q08 1Q09 1% (5)% 3,050 2,892 Gasoline Auto LPG Diesel Black Products 441 7% (3)% 17% 18% 10% 10% 64% 9% 62% 10% 4.84 mn tons 4.70 mn tons Source: Petroleum Industry Association for Gasoline, Diesel, Black Products and LPG Association for Auto-LPG 14

15 Petrol Ofisi Leading the Market Jet Fuel * Black Products Diesel Gasoline 71.5% 48.3% 28.5% 22.5% 71.5% Others 77.5% Others 51.7% Others 28.5% Others Source: Petroleum Industry Association * Company estimate Market shares are as of March 2009, except for jet fuel, which is as of December

16 Table of Contents Introduction Turkish Energy Sector Company Overview Business Lines Future Story Sales Analysis Financial Overview 16

17 Company History FOUNDATION PRIVATISATION SPO PRIVATISATION MERGER TENDER OFFER PRIVATE PLACEMENT SHAREHOLDER STRUCTURE TENDER OFFER PRIVATE PLACEMENT STRATEGIC PARTNERSHIP MCAP Established in 1941 as a State Economic Enterprise Taken into Privatization Program in % of PO shares acquired by IsDogan Petroleum Investments Inc. for US$ 1.26 billion in July % of total shares owned by PA were publicly offered and privatized as of March 2002 In July 2002, the remaining 25.83% shares held by PA were sold to IsDoğan, which already owned 51% of the Company IsDogan, owner of 82% of PO shares, merged with PO in December 2002 In November - December 2002, IsDogan increased its share to 96.3% through a tender offer In December 2002, 14% of the shares were transferred to Isbank and Dogan Holding 6.7% of PO shares were sold to institutional investors in February 2005 Isbank s PO shares (44.1%) were acquired by Dogan Holding in September 2005 A tender offer was carried out by Dogan Holding between October 14 31, % of PO shares were sold to institutional investors in January 2006 Free float after the tender is % % of shares were sold to OMV in March 2006 As of 30 April 2009, Petrol Ofisi s MCAP is US$1.8 billion 17

18 Shareholder Structure One of the top 3 conglomerates in Turkey and a leading media group Austria s largest listed industrial company and a leading oil and gas group in Central Europe 54.17% after support purchases Free Float 41.58% after support purchases 52.7% 13.3% 34.0% 4 BoD members 4 BoD members Erk Petrol 99.96% PO Oil Financing % Petrofinance % Kipet 52.00% PO Alternatif Yakıtlar 99.89% PO Gaz İletim 99.75% PO Georgia % PO Akdeniz Rafinerisi 99.99% PO Arama Üretim 99.96% Fuel Marketing Financing Financing Fuel Marketing LNG Marketing LNG Transport Georgia Operations Refining E&P 18

19 Transformation from a National Fuel Distributor to a Regional Energy Co. EXPANSION International Markets RETAIL AVIATION MARINE LUBRICANTS Vertical Integration / New Business Areas DIVERSIFICATION OIL GAS Exploration & Production Refining E & P Distribution Storage CNG Increasing Brand Value PRODUCT DIFFERENTIATION SERVICE QUALITY ALTERNATIVE DELIVERY CHANNELS DIFFERENTIATION R&D New Products Performance/Quality DDS Automation Site Operations Development Hardware & Software Improvement Projects Vehicle Identification System Automatic Personal Payment System PositiveCard Loyalty Programs Control Labs Operational Excellence CORE BUSINESS LINES Gasoline Diesel RETAIL Auto LPG Lubricants Diesel/Jet Fuel C&I SALES Black Products LNG Lubricants Production (Lubricants), Supply & Logistics 19

20 Table of Contents Introduction Turkish Energy Sector Company Overview Business Lines Future Story Sales Analysis Financial Overview 20

21 Business Lines E&P 26.75% share in the Black Sea Natural Gas Project 62% of diesel imported in 1Q09 Supply Largest Storage Capacity Logistics Largest Network 989,996 m 3 Retail 3,193 stations 1,600 m 3 avg throughput C&I State Companies Private Companies Refinery Plans Local TÜPRAŞ Imports Russia, Greece, Italy, Netherlands, Latvia, Malta and France DDS Direct Delivery System 12 Terminals (10 fuel, 2 LPG) Others #1 in Aviation Marine Lubricants Gasoline LPG Gasoil Products Jet Fuel Black Products LNG Production Lubricants 21

22 Accounting for 24%* of Turkey s Petroleum Storage Capacity Petrol Ofisi has the strongest logistics network in Turkey 12 terminals (including 2 LPG terminals) 989,996 m 3 Large capacity gives the Company the flexibility to; Distribute products more efficiently than competition Access multiple sources of supply Easily manage the national stock liability Haramidere Import higher percentage of products than competition Why import? Derince Samsun Trabzon CIF vs. FOB differential freight advantage Kırıkkale Lower product premiums More competitive payment terms Tax float benefit Aliağa (2) Antalya Aksaray Mersin İskenderun Batman* All terminal laboratories have received accreditation from Turkish Accreditation Agency as of July 2008 Currently 9 PO terminals are certified for running the mandatory EMRA Group II fuel tests, marking a first for a Turkish distribution company In 2008, Supply Department successfully protected the stock value against the price volatility in global markets by optimizing potential market risks within VaR limits * According to EMRA s total storage capacity figure of 4,176,294 m 3 for Turkey * Batman terminal, having a storage capacity of 7,450 m 3, was acquired in September 2008 and started operations in February 2009 DDS (Direct Delivery System) for Quality Assurance Petrol Ofisi has launched DDS in 2002, to maximize product quality DDS utilizes a dedicated fleet of 140 leased/subcontracted road tankers in the distribution of premium products (10 ppm diesel and 97 octane unleaded gasoline) In 1Q09, DDS deliveries reached 107k m 3 along with auto-lpg deliveries undertaken by PO to supply PO/gaz stations, amounting to 69k tons 22

23 Retail Only Company with Nationwide Coverage Turkey s largest nationwide network 3,193 stations as of March 2009 Number of Stations* March , ,368 1,235 Network Rationalization - Divesting stations with low throughput and efficiency and investing in new stations in Preferred Market Areas with high throughput and high potential to; Generate higher throughput Increase efficiency Improve flexibility in adapting to changes in the market Increase presence in 3 big cities Average annual throughput has more than doubled since year-end 2000, reaching 1,600 m Others** 1,788 * EMRA for Opet, Shell-Turcas, BP, Total and for Others and PO for PO and Erk ** Others include Akpet, Lukoil, Moil, Alpet, Petline 23

24 Operational Excellence in Retail Customer Focused Approach Customer Value Proposition Placing customer in the core of operations High quality products and services At well located and well designed convenient stations with appealing physical conditions With an optimum shop and clean restroom Via well trained, friendly site staff that are committed to deliver all To ensure that you and your vehicle can get back on the road rewarded for your loyalty to PO How to differentiate? Provide PO customers with high quality products Innovative Product Development Investing in technology Provide PO customers with high quality service Reinforcing the sales force Implementing operational improvement projects Continuous training for dealers and station personnel Completing the automation of stations through the employment of state-of-the-art technology Offer a loyalty program which is both very widespread and has a differentiating CVP Rewarding loyalty in line with customer segmentation All that PO invests in its customers be it through the utilization of technology, people or the Company s innovative spirit will translate into more satisfied customers, higher volumes and higher profitability. Utilizing technology and creative power Invest in Petrol Ofisi Brand 24

25 Retail Volume Enablers Network Growth Operational Improvements Marketing Activities NTI/NTPO Projects Network growth by opening or transferring new stations Each year there are 200 greenfield investments and 200 station transfers in the market CR Projects Contract renewals Each year contracts of 200 PO stations are up for renewal The sales performance of the station, the location, the relationship with the dealer are taken into consideration when allocating the CR budget * In March 2009, the Competition Board decided to limit the duration of all usufruct contracts by 5 years. Contracts signed prior to 2005 will benefit from the exemption until Contracts signed after will benefit from the exemption for the first five years. The new decree will lead to significant revisions in investment plans of distribution companies and thereby the NTI/NTPO and CR statistics displayed above Site improvement projects to capture the upside volume potential of the existing stations; Hardware Improvements Toilets, lighting, landscaping, visuals, car-wash and air/water, lube changing units Software Improvements Improvements that don t require additional CAPEX Training of station personnel Localized campaigns/promotions Optimum utilization of the site Site Operations Development Program Territory Trainers are allocated to each site for a week to train station staff Fuel Differentation V/Max Performance Series Launched in Sep 2007 Positive effect on pump sales by increasing high income / high mileage customers Low Sulphur Diesel 10ppm Mandatory starting from PO was the 1 st in the market to offer it in Dec st mover advantage Positive Card Launched in Jan 2008 Broadest customer commitment program in Turkey Payment and loyalty card in 1 Convenience of paying for fuel without leaving the vehicle Over 1.5 million members! 25

26 LPG - Growing Business Line Turkey s largest Auto-LPG network 1,557 stations, 2008 sales of 446k tons, marking 9.2% Y-o-Y growth, 21.1%* market share Petrol Ofisi used to operate through 2 channels: Contracted and Petrogaz (PO Brand) stations The national distribution license was granted in March 2007 After receiving the national distribution license, PO launched a new brand, PO/gaz and started converting all Contracted and Petrogaz stations to this brand creating higher earnings on auto-lpg sales Within the scope of the national distributor license requirements, Petrol Ofisi has 2 filling facilities; Aksaray and Aliağa 2 LPG terminals with a total capacity of 50,000 m 3 will become operational in 2012, enabling LPG procurement through imports to achieve higher supply margins As of March 2009, conversion of Petrogaz stations to PO/gaz has been completed, there are 1,210 PO/gaz and 347 contracted stations as of 1Q09 As of 1Q09, sales volume has reached 86k tons, 4.9% lower than 1Q08 due to logistics problems experienced during the conversion of a group of stations * Source: Energy Market Regulatory Authority as of YE08 26

27 C&I - Fueling the Energy that Turkish Industry Needs and Relies on Turkey s biggest single B2P, B2B and B2D fuel distributor Nationwide presence, established infrastructure, logistics capability & long-term business relationships Commercial and Industrial (C&I) customers are defined under 3 separate categories State-owned entities, military institutions and municipalities Private companies in industry, agriculture, transport, logistics and construction Sub-distributors who supply commercial customers with an annual consumption of less than 5,000 tons that distribution companies can t supply by law C&I sales are comprised mostly of black product, gasoil and jet fuel sales Total C&I sales volume has exceeded 5.0 mn m 3 in 2008 In 1Q09, black product sales has reached 409 thousand tons while the market share stood at 48.3% In recent years, success ratio in state tenders has improved in the face of increasing competition while enjoying improved profit margins 27

28 Land, Air & Sea No Boundaries for Petrol Ofisi Market leader with 72%* market share 2008 sales of 1.9 mn m 3, 249,000 aircraft refuelings per annum PO Air is present at 35 airports Customers include Turkish Airlines, all other domestic airlines as well as more than 60 international airline carriers: KLM, SAS, Lufthansa, Air France, Aeroflot... PO Air is the only company that can supply Istanbul Airport through its pipelines, lowering transportation costs In 1Q09, jet fuel sales volume has contracted by 1.2% Y-o-Y and reached 356 thousand m 3 En route to becoming an international player... In 2006, PO air started supplying Turkish Airlines and other domestic carriers at international airports (22 airports as of 1Q09) 95% increase in international sales in 2008 over 2007 In 2007, PO Air started supplying Batumi Airport. Evaluating further opportunities in the region Market leader with 41%* market share 2008 sales of 790,000 m 3 PO Marine is the only Turkish supplier to Own marine terminals in all seas Offer all marine fuels and lubricants Provide transit bunker services in Turkish Black Sea (Samsun and Trabzon) and İskenderun In 2008, PO has started bunker fuel sales in Ceyhan as the first and only supplier in the region Other than the 8 marine terminals along the coastlines, PO Marine operates the largest floating station network in Turkey In 1Q09 PO Marine has sold 128k tons of marine fuels in the domestic and transit markets PO Marine supplies Turkish ship owners abroad and in 2008 has sold 28,000 m 3 of marine fuels within this scope PO Marine has reached 66%* market share in domestic and 40%* in transit marine sales as of YE08 Introduced in July 2005 and strong position as the second largest company in the market, 159 LNG tanks installed, close to 35 LNG tankers LNG is natural gas liquid form which is stored at approximately -162ºC LNG is mainly used by commercial and industrial customers who do not have geological or economical access to natural gas pipelines LNG is transported by specially designed cryogenic road tankers to customers premises and stored in specially designed cryogenic tanks LNG was introduced to the Turkish market in 2003 and has been projected to reach a market size of 350k* tons as of YE08 PO started to market LNG in July 2005 and has reached 21%* market share as of YE08 As of 1Q09, PO LNG sales volume has reached 14k tons, * Company estimate as of YE08 28

29 Leading Player in the Lubricants Market 19%* market share - 1 out of every 5 lubricants is sold by PO 2008 sales of 82,666 tons including exports of 12,925 tons to 22 countries Petrol Ofisi is Turkey s leading lubricant producer with a total annual capacity of 140,000 tons in its Derince plant At the beginning of the year, Lubricants Group has been reorganized with the ultimate target of growth and the efforts have already paid off, PO lubricants gained market share in the first quarter of 2009 A strategic decision was taken to focus more on high technology product sales and less on process oil and monograde segments PO is continuously expanding its product portfolio in lubricants and total number of products has reached 382 as of 1Q09 In 1Q09, domestic sales volume reached 11k tons while the export volume was 3k tons (20 countries) Lubricants market reacted more radically to the slowdown in economy as compared to fuel products whereby it contracted by 31%* in 2m09 Petrol Ofisi Technology Center ( POTEM ), accredited for 111 domestic and international tests and having the capacity to perform 166 different test methods, has been established in October 2007 in Exporting lubricants to 3 continents In 2008, PO exported lubricants to 22 countries totaling to 12.9k tons In 2008, PO also continued production for Petrom and designated OMV markets Derince on an area of 1,200 m 2 * Source: Petroleum Industry Association as of Feb

30 Table of Contents Introduction Turkish Energy Sector Company Overview Business Lines Future Story Sales Analysis Financial Overview 30

31 All Fueled Up Future Backed by a strong partnership a vertically integrated market leader #1 in retail #1 in aviation #1 in marine #1 in lubricants #1 & a regional WER Supplying Turkish carriers at >100 international airports Supplying international airports Biggest marine refueler of the East Mediterranean Exporting lubricants to >30 countries 31

32 Going into Refining - A Step Towards Vertical Integration July 12, 2006 In line with its strategy of becoming a vertically integrated regional energy player, Petrol Ofisi applied to EMRA to build a refinery in Ceyhan, the energy hub of the region June 11, 2007 EMRA stated that all paperwork regarding PO s application was complete but decided that it was not legally acceptable for a fuel distributor to hold a refining license June 13, 2007 A separate refining company was established and the license application was refiled June 27, 2007 EMRA approved PO s application and decided to issue a provisional license on the condition that the Environmental Impact Assessment (EIA) Positive certificate is submitted to EMRA within 90 days October 1, 2007 EIA Positive certificate was issued by the Ministry of Environment and Forestry and submitted to EMRA by PO December 6, 2007 EMRA Commission decided to get opinion of its legal department regarding some other company s application to EMRA for installing a power plant on the parcels within PO s nominated land December 15, 2008 EMRA published a communiqué regarding the criteria to be employed in the evaluation of license applications submitted for the same location and stated that electricity projects would be regarded as public utility service and thus given priority over refinery license applications 32

33 Western Black Sea Project A Huge First Step into Upstream Petrol Ofisi purchased Toreador s 26.75% share in the Western Black Sea Project for USD55 mn in March largest recorded E&P deal in Turkey - and became a partner in Turkey s largest natural gas production project Project Details Offshore E&P project, where natural gas is being produced through three platforms, located in two licenses out of eight ENERGY CORPORATION 12.25% 10.00% 51.00% 1976 First Well Drilled 26.75% 2007 First Gas Delivery TPAO is the operator with 51% share, PO is the second largest shareholder %26,75 Phase I producing 340 tcm/day from 3 offshore platforms Phase II will start production in 2010 and will constitute the majority of the total production Why this project? Cash generating proven and producing reserves Reserve growth upside New development areas and exploration potential in undrilled structures Enabling to enter the upstream business with exploration and production assets all within one deal Growing, vibrant, profitable and properly regulated natural gas market 33