EXCLUSIVE Mariana Gheorghe: "This year, Petrom will find out new data about the deposits in the Black Sea"

Reporter: This year, Petrom and its partners will interpret the data, after the making of the seismic studies in the perimeters of the Black Sea. What does that mean? Will we find certain data about the deposits of the Black Sea?

Mariana Gheorghe: Unfortunately, it is not that easy to get certain data. A deposit can behave differently, even when you start production. Not even when you do that do you have any certainty about the reserves. This is the nature of the gas and oil industry. This year, we will read the statistical data and we will interpret them, to see to what extent the initial estimates will be confirmed, (ed. note: 42-84 billion cubic meters of gas). But this is only an intermediate stage. We still have exploration works to perform. It will take years before we can tell whether we do have reserves in the Black Sea which we can exploit commercially.

Reporter: Do you have any new partnerships under negotiation for explorations and the development of the old deposits?

Mariana Gheorghe: Petrom is a company which makes long term investments. The investment cycle is 5-10 years for an exploration project. When we make the planning of the investments and the resources which we have available, we take this aspect under consideration, but also our objective of sustainable growth. We need to develop the human capacity of Petrom to manage the ambitious investment projects and to plan the cash-flow, given the unpredictability of the evolution of oil and fuel prices, as well as the organizational capacity to be flexible on an extremely dynamic market. The oil industry depends heavily on these quotations, and the economic cyclicity is very big. One year can bring very high prices, based on correct market mechanisms, which concern supply and demand, and another can bring very low prices, due to reasons which do not concern supply and demand.

That is why Petrom develops based on durable principles and has chosen to do long term investments. That is why we succeed in having good financial results. For example, in the past few years, when the price of crude was rising, we were still implementing programs to streamline and optimize the production costs. We operate in a global market and you need to be able to successfully deal with unpredictable events.

Reporter: And did Petrom come to the point where it says stop to the development of new explorations?

Mariana Gheorghe: I think that currently, Petrom has a large enough volume of growth on this segment, to make this activity sustainable and to complete what we have. But the market is dynamic. We will continue to look at new opportunities which we will review carefully, according to our principles of sustainable development in the long term.

Reporter: Are you still looking for partners for the exploration projects which exist or for new projects?

Mariana Gheorghe: We will continue to look at the possibilities of co-opting new partners for the development of mature deposits, as well as our exploration projects. On the exploration side, the risk is great and we share this risk with our partners.

Reporter: But how did you manage to obtain yet another record level of the net profit in a year of crisis, when sales of energy products continued to drop (fuel, gas, electricity) and as Petrom has made investments of about 1 billion Euros? What is the secret?

Mariana Gheorghe: The secret of Petrom is that it conducts its based on commercial principles, in compliance with the law and durable development in the long term. These are the basic elements of the very good financial results we had over the last few years. But these results of 2012 do not only reflect the efforts of the company for that year. They are the combined result of the efforts made in the previous years. In other words, obtaining such good financial results is a normal outcome of making such big investments in the previous years. Any investment is made to give a company either a bigger output, or to lower production costs. This is the impact of the bigger investments made by Petrom over the last few years: the stabilization of output, the reduction of costs, higher revenues. The investments are planned in such a manner that you don't get good financial results, dividends and jobs secured for a certain year, but for several years.

Reporter: But aren't these good financial results of Petrom also owed to the high prices of fuel and crude oil?

Mariana Gheorghe: The prices of crude, gas and fuel are essential for an oil company, which needs cashflow to secure its operations and investments. Petrom makes significant investments in exploration and the stabilization of production out of the old deposits, which have been exploited for decades. For us, what is important is the management of these investment needs in relation to the resources we have - cash, the possibility of borrowing money and raising funding from the existing shareholders or from the stock market.

If you lack liquidity, in other words, if the high prices on the international fuel and oil markets, you can't cover the operating costs and investments. So the level of the prices is a key-element for the cash-flow of any oil company. Unfortunately, the evolution of oil prices is unpredictable, and the volatility is great. On the other hand, the oil companies are faced with increasingly high investment costs: the explorations are extremely costly and have a high risk, and the older deposits require new, effective technologies, which are also more expensive.

What is very important at Petrom is the principles of the pricing policy. We do not have a pricing policy set in a purely administrative manner, based on circumstantial adjustments, which would bring us short term benefits. That is not how you get good results in the long run. We only apply durable principles in our pricing policy.

Reporter: Do you think that Petrom will repeat its financial performance of 2011-2012 this year as well?

Mariana Gheorghe: I can't make that kind of evaluation right now. Like I said, it depends on the evolution of the quotations of crude and fuel, but we also have the new taxation system introduced by the government in February 2013. The authorities have imposed a new tax of 60% on additional revenues from the liberalization of the price of natural gas for domestically produced natural gas, as well as a 0.5% tax on the extraction of fuel. Since we currently don't have the methodological norms for the application of the new taxes, I can't assess the impact on the results of the company. I hope that we will continue to have a good activity if the business environment will be favorable.

Reporter: Thank you!