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IPIC’s FY 2015 financial performance driven by long-term investment strategy in volatile global environment

30 June 2016
IPIC’s FY 2015 financial performance driven by long-term investment strategy in volatile global environment

ABU DHABI– Abu Dhabi and state-owned oil and gas investment company International Petroleum Investment Company PJSC (“IPIC” or “the Group”) announces its year-end financial results for 2015 (“FY 2015”).

Financial Review

Due to the prevailing adverse market conditions in the oil and gas industry, the Group announced revenues of US$35.8 billion for FY 2015, compared to US$51.1 billion recorded for the fiscal year 2014.

The Group also announced net profit down from US$1.5 billion in 2014 to a loss of US$2.6 billion in 2015.  The 2015 results are primarily attributable to the biggest slump in oil prices in 14 years and lower margins in the Group’s midstream and power business.

The performance across the Group’s business units reflects the current cyclical downturn in the oil and gas industry, which has impacted investment and operations throughout the entire global hydrocarbon value chain. Following a thorough review of the Group’s portfolio in the wake of current global industry conditions, a low-growth outlook for commodities for the coming year, as well as other commercial factors, the Group announced a write-down in total assets under management to US$58 billion for FY2015.

Despite current macroeconomic conditions, the Group has prioritised managing cash flow, reporting a strong cash position of US$5.4 billion at the end of FY 2015. The Group’s strong cash flow and liquidity position will enable it to remain in a strong financial position to execute its strategy and investments in the future.

Commenting on IPIC’s financial performance, His Excellency Suhail Mohamed Al Mazrouei, UAE Minister of Energy and Managing Director of Abu Dhabi’s International Petroleum Investment Company said, “IPIC remains in strong position due to an investment portfolio that is diversified throughout the hydrocarbon value chain, as well as prudent financial management in the wake the current adverse business climate.  2015 was a challenging year for the world’s oil and gas sector, as the downturn in commodities prices impacted the global oil and gas industry. However, we believe IPIC is well positioned as a strong complement to Mubadala as global energy demand gradually resumes its upward trend.”

“IPIC is a long-term energy investor and for over 30 years has successfully invested throughout the oil and gas sector on a global scale. Our industry has unique supply-demand dynamics and I am confident that we are positioning IPIC well to navigate the current slump in oil and gas prices. In addition to portfolio management, the Group has spent the past year strengthening our senior leadership team and is now prioritising greater due diligence and corporate governance in our activities to further enhance our internal controls.”

“Looking ahead, IPIC will prioritise the continued diversification of our energy portfolio – particularly our downstream, refining and petrochemical business units – to mitigate risk in the current industry environment. Additionally, we will further strengthen our internal capacities to remain an industry leader and a key global energy player for Abu Dhabi and the wider region. I remain highly confident in the long-term potential of our Group and look forward to the opportunities afforded by the merger of IPIC and Mubadala.”

Operational Continuity

The Group has worked to maintain operational continuity throughout its portfolio of upstream, midstream and power, downstream, diversified and projects. 

The Group’s upstream portfolio was adversely impacted by the global slump in oil and gas prices, which affected revenues from oil and gas sales, and has also led to a reduction in capital expenditure on exploration activities. However, the Group’s assets are geographically diversified and are in various stages of the upstream lifecycle, enabling the Group to capitalise on long-term upstream exploration and production opportunities.

The group’s midstream and power investments remain strong despite global challenges. The industry has seen reductions in exploration activity, while production and supply remained strong, which has created opportunities for midstream companies to capitalise on new global supply dynamics.

The Group’s downstream investments business unit was exposed to decreasing profit margins, particularly in refining operations with exposure to European markets.  As global demand for storage, petrochemicals and refining capabilities remain strong despite the reduction in oil and gas exploration globally, IPIC’s downstream investments are strongly positioned for the future.

Lastly, the Group’s diversified investment segments continue to actively invest across various industries including infrastructure, aviation, real estate, automotive, commodities, energy and financial services. These diversified investments further expand and de-risk IPIC’s portfolio from beyond its principle hydrocarbon-focused investments.

New Leadership

In FY 2015, IPIC strategically appointed senior individuals to further strengthen its senior management team.

Most notably, in April 2015, the Group announced the appointment of His Excellency Suhail Mohamed Al Mazrouei, Minister of Energy for the UAE, as Chairman of IPIC. His Excellency is the current UAE Minister of Energy, being appointed in March 2013, and is a veteran of the oil and gas industry and one of the foremost authorities in the region on energy-related issues.

The appointment reflects a group decision to strengthen its senior leadership and to prioritise increased due diligence and corporate governance at the Group level.

Merger of Equals

On 29 June 2016, His Highness Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi, Chairman of the Executive Council, and Deputy Supreme Commander of the UAE Armed Forces, has issued a resolution to merge IPIC and Mubadala Development Company.

The resolution stipulated that a joint committee be created and assigned with the responsibility of merging the businesses of the two companies. The joint committee will be chaired by His Highness Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs, with HE Khaldoon Khalifa Al Mubarak serving as Vice Chairman and the membership of HE Suhail Mohamed Faraj Al Mazrouei, HE Hamad Al Hurr Al Suwaidi; and the Chairman of the Abu Dhabi Department of Finance.

Integrating the two entities would create greater benefits and enhanced economic value to the Government of Abu Dhabi. The combined entity would realize synergies and growth in multiple sectors including; the energy and utilities sector, technology, aerospace, industry, health care, real estate and financial investments. 

It will also have the ability to contribute more significantly to the diversification of the economy, in line with the Abu Dhabi Plan and the country’s long-term vision. It would also build on the creation of quality, long-term employment and development of human capital in critical sectors for the country.

The two companies will continue to operate independently until the joint committee concludes its assignment.