PARTEX OIL AND GAS (HOLDINGS) CORPORATION
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2004
At 3.9% world wide economic growth picked up sharply in 2004, with advanced economies growing 3.4%. The increase in real GDP growth in the US was 4.4% an improvement of some 47% over 2003; newly industrialised Asian economies grew 5.5%; Japan's GDP grew by 2.6%; the Eurozone increased by 2.0% compared to 0.5% in 2003.
Consumer price inflation remained subdued at 2.7% in the US and 2.2% in the Eurozone.
Once again the world economy is expected to show real growth in 2005, although at a lesser pace than in 2004, with inflation remaining under control.
The political uncertainties, high oil prices and fears concerning the effects of globalization on advanced economy markets, particularly the US and the eurozone, meant that equities performed poorly in the first three quarters of 2004; the last quarter, however, gave a strong performance so that the year as a whole was positive. In local currency terms the broad US equity market grew by 9%, the Japanese market by 7.6% and Euro equities by 6.9%.
The US Central Bank started raising short term rates in June 2004; short term rates increased from 1% at the beginning of the year to 2.25% in December 2004. The European Central Bank kept rates unchanged over 2004. Ten year rates were substantially unchanged in the US but fell in Europe.
The Euro continued to increase in value against the US dollar but much less aggressively than in 2003 - up 7.6% in 2004, with the highest point right at the year end.
Oil prices increased by 32% in 2004, from USD 30.48 at the beginning of the year to USD 40.24 at the year end for Brent spot prices. The average price, at USD 38, was substantially higher than that in 2003 (USD 29). The highest price was USD 52 and the lowest USD 29, all once again much higher than in 2003.
The highlight of the year in relation to the oil interests was the extension of the Oman concession for a further 40 years ending in 2044.
There was a 28% increase in oil and gas sales. The increase in the margin was lower than that of sales due to significant sales being on contracts at a fixed margin which do not reflect the increases in market prices.
Oil interests were valued at fair value in 2001 in accordance with international reporting standards. Net present values have been recalculated at each year end since then to ensure that they remain reasonable in current circumstances. The balance sheet values were increased substantially due to the extension of the concession in Oman to 2044 and generally favourable interest rates on longer term bonds.
The Group's concessions in Brazil and Algeria continue to be in an early exploration stage while that in Kazakhstan is in a second pilot phase which is expected to terminate in 2006 to be followed by a full field development plan.
The investment stage in the renewable energy projects continued: additional investments were made in the NovEnergia 2010 fund and in advances to Lusenerg-Energias Renováveis SGPS, SA. Further investments were made in the SGAM 4/D energy fund which has taken minority interests in a refining company and in companies providing services to the oil industry. These investments provide some diversification from the oil exploration industry.
The board proposes a dividend of USD 600 (2003 - USD 600) per share payable over 2005 relating to 2004 profits: total cost will be USD 30,000,000 (2003 : USD 30,000,000).
By order of the board
A.J. MACKINTOSH
(Secretary to the board)
