Ad-hoc Report - The decision of the Board of Directors of Petrom from October 18, 2005, regarding the approval of the services contract closed between Petrom and Petromservice
In compliance with Law nr. 297/2004 and Regulation no. 13/2004 of CNVM
Date of report: October 20, 2005
Name of issuer: PETROM S.A.
Headquarter: Bucharest, 239 Calea Dorobantilor, district 1
Telephone/fax number: 021 4060101/021 4060436
Sole registration number at the Trade Register Office: 1590082
Fiscal attribute: R
Trade Register Number: J 40/8302/1997
Share capital: 5,600,050,607.8 RON
Regulated market on which the issued shares are traded: Bucharest Stock Exchange
Significant event to be reported:
The decision of the Board of Directors of Petrom from October 18, 2005, regarding the approval of the services contract closed between Petrom and Petromservice
Petrom and Petromservice are currently bound by an agreement entered into in 2002, concerning the provision of maintenance and other services to Petrom. Petromservice was created by outsourcing the relevant services from Petrom – consequently, Petromservice employs former Petrom personnel. In 2004, the scope of the contract was extended by the further outsourcing of certain work-over services from Petrom. The existing contract is valid until March 1, 2007.
Petrom and Petromservice have agreed to replace the existing contract with a new one, valid until 2012, which enables a significant restructuring of the joint operations, in particular of the maintenance and work-over activities carried out by Petromservice for the benefit of Petrom. This restructuring mirrors the process that Petrom is undergoing internally in terms of increasing efficiency of its own remaining work-over operations.
The efficiency gains are supported by the introduction of an order-based system. In work-over, the number of Petromservice crews operating for Petrom will be reduced and nightshift will be eliminated in 2006. In maintenance and operation services, the total number of Petromservice personnel working for Petrom and directly involved in the provision of the services will be reduced in accordance with the agreed Petrom requirements.
Tariffs/rates have been agreed for the next year and will be subject to annual renegotiation.
In order to support the restructuring efforts of Petromservice, Petrom has agreed to ensure a certain minimum level of works of EUR 180 million in 2006 (compared with an actual level of EUR 243 million (9867 billion ROL) in 2004 and EUR 200 million agreed for 2005. The minimum amount will decrease by 10% in each of the following years. Petrom has also agreed to pay the redundancy costs associated with any employee layoffs implemented by Petromservice until December 31, 2007.
Petromservice has agreed to improve quality standards and procedures so as to obtain certification by Norske Veritas until June 30, 2008 or, alternatively, to include in its shareholding structure a reputable international partner accepted by Petrom until December 31, 2007. Petromservice has also agreed to implement a plan that would ensure compliance with Petrom’s health, safety and environment standards.
Petromservice has also agreed to change its name and logo until December 31, 2007 so they no longer suggest an affiliation with Petrom.
The entry into force of the contract is conditional upon the obtaining of the clearance from the Romanian Competition Council.