1. Minerals and Energy Portfolio Committee
Mpumelelo Tshume
MD / CEO
22 February 2019

2. The Petroleum Oil and Gas Corporation of South Africa
(Pty) Ltd
22 February 2019

3. Delivery Vision and strategic objectives Performance Budget 2003/2004
Inform the Portfolio Committee on PetroSA’s:
Vision and strategic objectives
Business and challenges
Performance
Budget 2003/2004
22 February 2019

4. Structure of presentation
Section 1 : Vision and overview of current business
Section 2 : Strategic objectives
Section 3 : Business performance 2002/2003
Section 4 : Budget 2003/2004
Section 5 : Corporate Governance
Section 6 : Challenges and conclusion
22 February 2019

5. Vision and Overview of current business
Section 1
22 February 2019

6. Vision
To be a leading African energy company, competing globally in an environmentally reponsible manner, to the benefit of stakeholders.
22 February 2019

7. Overview Merger of Soekor, Mossgas and certain activities of SFF
Business strategy informed by:
Energy White Paper (1998)
Business Plan and Corporate Governance review report sanctioned by Cabinet in May 2001
Wholly state-owned
Separate legal entity under Companies Act
Mandated to manage all commercial assets of state in the petroleum industry
22 February 2019

8. Overview (continued) Managed on sound commercial business principles
Forecasted turnover for 2002/2003 financial year - R5.6 billion.
Forecasted profit after tax and before dividends for 2002/2003 financial year - R1.6 billion.
Sound balance sheet to raise financing for major capital projects
Book value of assets at end March R12.2 billion
Employs approximately people
22 February 2019

9. Overview (continued)
Supply approximately 7% of total South African refined product - Mossel bay GTL plant
Oil production from Southern Cape offshore approximately barrels per day
Chemical exports - R600 million per annum
World’s largest commercial natural gas to transportation fuels plant
Sasol licence agreement limitations
Participation in international upstream petroleum ventures
22 February 2019

10. FA Platform 100 km south of Mossel Bay 220 m high 105 m water depth
9 direct wells, 3 satellite wells
7 wells by remote control through EM buoy

11. Strategic Objectives
Section 2
22 February 2019

12. Corporate Strategic Thrust – Exploration and Production Division
Exploring, developing and producing gas reserves on a commercial basis to supplement feedstock to Manufacturing refinery
Intensify investment in the upstream sector of value chain by focusing on Africa
Optimising production and current operations to generate cash flow for current and future developments
22 February 2019

13. Corporate Strategic Thrust – Manufacturing Division
Optimising production and current operations to generate cash flow for current and future developments
Evaluating alternative sources of feedstock to Manufacturing refinery
Reduce Manufacturing cost base over next 18 months to achieve a R720 million saving per year
22 February 2019

14. Corporate Strategic Thrust – Trading, Supply and Logistics
Expanding product range into higher-value chemicals and new environmentally compliant fuels
Develop and grow international sales by growing market share in existing customer base and extending sales regions already served
Optimisation of logistics in consideration of broad strategy to supply 30% of fuel products to BEE companies
Product trading and hedging to penetrate markets for oil offtakes as well as to minimise exposure
22 February 2019

15. Corporate Strategic Thrust – Corporate Planning and New Ventures
Extending position in value chain to wholesale and retail marketing
Commercialise and exploit gas to liquids (GTL) know-how
Develop Pipeline infrastructure along West Coast
Investigate national refinery capacity expansion
Enter LNG, Methanol, down stream petrochemicals businesses via partnerships and synergistic acquisitions
22 February 2019

16. Corporate Strategic Thrust – Support Functions
Ensure access to world-class support services, systems and practices in pursuit of operational excellence
Ensure functional systems support empowerment of teams and individuals
Implement competency development programs to retain, develop and attract human capital
22 February 2019

17. Corporate Strategic Thrust – Transformation
Black Economic Empowerment
Achieve Employment Equity in line with Policy: 60 : 40
Develop:
Skills and Capacity in line with commercial focus
Corporate Social Investment Strategy and Funding Plan
Policy, targets and procedures to promote affirmable procurement
Facilitate the development of suppliers
Promote Equity participation by black owned companies in our businesses
Achieve a commercially orientated culture change
22 February 2019

18. Business Performance 2002/2003
Section 3
22 February 2019

19. Summary of salient points
2002
2003
% change
Net income before tax ( R mil)
1 171
1 646 41
Net income before dividend for the year (R mil)
1140
1646 44
Opex to revenue(%) 62 59
(5)
Total liabilities : total assets (%) 51 45
(12)
Cash retained from operations(R mil)
2609
2 243
(14)
Debt – Equity (%) 46 35
(24)
Sales volumes ( m3) 61
22 February 2019

20. Business Performance 20002/2003
Implementation of merger completed
Entered into three upstream participation agreements in Gabon, Algeria and Nigeria
Oil production better than expected from Oribi and Oryx oil fields (Oribi: produced 25 million barrels vs expected 11 billion barrels; Oryx: produced 9 million barrels vs expected 4.5 million barrels)
GTL manufacturing plant achieve 1 million hours without disabling injuries
Good progress in securing gas feedstock for GTL manufacturing plant
Ibhubesi gas fields
Block 9 gas fields
Kudu gas fields
22 February 2019

21. Business Performance 20002/2003 (continued)
Entered into numerous Memorandums of Co-Operation and Memorandums of Understanding with NOC’s, IOC,s and Governments
Refocused marketing efforts for petrochemical products internationally reaped significant monetary benefits
Commissioning of LAD/LAK 1 project, increase petrochemicals production by tons per year. Gross revenue added of $30 million per year.
22 February 2019

22. Business Performance 2002/2003 (continued)
Initiate social development programs in Mossel Bay and Limpopo Province
Implement progressive HR policies and set R115 million aside for training and skills development over next three years
Significant progress to achieving representative demographic profile
Contract of R750 million for procurement of condensate awarded to BEE company
Financial performance from Finance outstanding.
22 February 2019

23. Business Performance 2002/2003 (continued) Staff by Race
22 February 2019

24. Business Performance 2002/2003 (continued) Top Management
22 February 2019

25. Business Performance 2002/2003
(continued) Staff by race, gender and designated groups
22 February 2019

26. Business Performance 2002/2003
(continued) BEE discretionary expenditure
R100 Million Target (16% of Opex) for
22 February 2019

27. BEE- Current and future initiatives
Projected BEE Procurement expenditure for is R200m (Estimated 30%)
25% of all staff will be female
1% of all staff will be disabled individuals
60% of staff will be from the designated group and 40% non-designated by 2004 (By level and division)
R6m will be spent on supplier development programme
Establishing a forum to discuss opportunities between black business, established suppliers and PetroSA
22 February 2019

28. BEE- Current and future initiatives
(continued)
R50m will be spent on CSI-targetting education, poverty alleviation, community development and enterprise development, including the registration of PetroSA Trust
9% interest in Sable Oil field to be sold to HDSA groupings by mid year 2003
PetroSA is funding the Vukani initiative to train 450 women intrepeneurs from 9 provinces, and 30 Process Controllers
Partnerships being established with SABS and CHIETA and other state owned organisations to promote enterprise development
22 February 2019

29. Women And Disabled Groups
BEE- Current and future initiatives (continued)
Women And Disabled Groups
PetroSA is introducing new BEE reporting parameters effective April 2003:
Black women owned enterprises,
Black disabled owned enterprises,
Black empowered enterprises,
Black enterprise 50,1% with preference for 100% black owned enterprises
To date PetroSA has spent R12m on six Black women owned enterprises,
Zero expenditure on Disabled owned enterprises.
22 February 2019

30. Budget
2003/2004
Section 4
22 February 2019

31. Summary 2003/4 Budget Employment equity 60:40 Gender equity 25%
Black economic empowerment (R mil) 200
Sales growth %
Productivity improvement %
Return on shareholders funds %
Net profit before tax(R mil)
Net profit after tax (R mil)
22 February 2019

32. Income statement Rand millions 2002 2003 2004 2005 2006 Sales 5 281
5 592
5 830
6 436
7 805
Cost of sales
(1 714)
( 2 379)
(2 517)
(3 093)
(3 327)
Fixed operating costs
(1 564)
(2 173)
(2 697)
(2 559)
(2 313)
Interest received
278
353
186
216
411
Interest paid - pure
(1 408)
(156)
(154)
(136)
(100)
Revaluation - loans
298
407
230
(169)
(331)
Taxation
(31)
Net profit before tax
1171
1646
877
695
2145
Proceeds from sale of assets
650 55
22 February 2019

33. Salient ratios of financial plan
2002
2003
2004
2005
2006
Net operating margin
40%
39%
36%
32%
Interest cover 1 7 6
ROACE
18%
21%
20%
19%
Debt / equity
46%
35%
23%
28%
51%
22 February 2019

34. Investments required in the future ( 2003/4)
R millions
Manufacturing
E & P
Other
Gross total Capex
22 February 2019

35. Corporate Governance
Section 5
22 February 2019

36. Corporate Governance Compliance a high priority
Compliance required to following main acts / regulations:
Public Finance Management Act
Treasury regulations
South Aftican Reserve Bank regulations
Close working relationship with regulatury bodies essential to ensure quick decision making and approval process
Opportunity to add 3.3 million barrels of oil to reserve base lost
22 February 2019

37. Challenges and Conclusion
Section 6
22 February 2019

38. Challenges
Expand business along the industry value chain, with retail as main priority
Secure long term gas feedstock for GTL manufacturing plant
Progress GTL commercialisation projects to ensure commisioning of first full scale plant not later than 2009
Commissioning of SABLE oil field in 2nd quarter of Will add 12 million barrels to oil reserves. Expected capital cost of $ 86 million
Successful shutdown during 2nd quarter of 2003.Expected cost of R171 million, margin impact of R220 million
22 February 2019

39. Challenges (continued)
Migration to unleaded fuels
Create a culture and value system aligned to our commercial objectives
Skills enhancement to create required capacity
Consolidation of business architecture- systems and policies
Achievement of transformation objectives, especially BEE
Corporate Governance compliance
Meaningful contribution to NEPAD objectives
22 February 2019

40. Conclusion
The business strategy of PetroSA is based on achieving and contributing to following shareholder objectives:
Achieve a competitive commercially viable company on a sustained basis
Active along the full value chain of the petroleum, oil, gas and petrochemical sectors
Achieve transformation on a continuous basis, with focus on BEE delivery
Up skill of staff and industry capacity building
22 February 2019

41. Thank you
22 February 2019