Nova Chemicals benefits from Alberta Advantage, announces outstanding results for Q2

25-Jul-08

Nova Chemicals has announced outstanding operating results and outlook for the second half. Results improved significantly despite higher operating costs due to a stronger Canadian dollar and higher energy prices. Despite unprecedented energy price volatility and economic uncertainty, NOVA Chemicals' businesses again delivered EBITDA at an annualized rate of US$1.1 bln. With the Alberta Advantage surging, polyethylene prices moving up sharply, and indications that the styrenics business is improving, the second half of the year is expected to be stronger than the first. The Olefins/Polyolefins business unit reported adjusted EBITDA of US$258 mln in Q2-08, the highest Q2 performance in the company history and significantly higher than the US$228 mln in the Q2 last year. The year-over-year improvement was due to higher polyethylene volumes and olefin chain margins, which was mainly due to the Alberta Advantage. Higher ethylene and polyethylene prices more than offset higher feedstock and operating costs. Polyethylene sales volume exceeded nameplate capacity for the third consecutive quarter, despite planned maintenance outages at both Joffre polyethylene production facilities. The Joffre Olefins segment reported adjusted EBITDA of US$185 mln in Q2-2008, up from US$168 mln in Q1-2008. Margins increased as higher prices for ethylene and co-products outpaced increases in feedstock and operating costs, and due to a gain of US$8 mln (US$6 mln after-tax) that represented a true-up of results from a linear alpha olefins margin sharing arrangement. Industry prices for ethylene increased 8%, driven primarily by higher feedstock costs. Alberta ethane costs were 23% higher than the first quarter, as natural gas prices in North America rose in response to seasonally low inventory and increasing crude oil prices. In comparison, United States Gulf Coast (USGC) ethane prices were just 4% higher than Q1. Outages at USGC ethylene plants early in Q2 temporarily reduced ethane consumption and caused prices to soften.