The Company

FinancesJanuary – december, 2010

ENAP Reports earnings of US$ 82 million for 2010

This result shows the recovery from the losses suffered in the first half of 2010, which were severely affected by the earthquake of February 27, and reaffirms the good results demonstrated in the last six months with both refineries operating normally.

Empresa Nacional del Petróleo produced a positive consolidated net result of US$ 82 million in 2010, maintaining the trend shown in the third quarter and improving the company’s results, which enabled it to reverse the losses suffered in the first half of the year.

This result includes the costs related to the divestment plan the company has had to face, which were booked in the last quarter of the year. The result for the year 2010 of US$ 82 million is shown after income tax at the rate of 17%. Earnings measured after the special additional tax of 40%, applicable to state-owned companies (decree law 2,398), amounted to US$ 70 million.

It is important to stress that the year’s results were strongly affected by the earthquake and the deterioration in international refining margins during a large part of the year. Nevertheless, the recovery in the company’s results began to be seen from the second quarter of the year.

This is evident from the company’s result, after 17% income tax, to March 31, 2010 of a loss of US$81 million, affected by the stoppages of both refineries as a result of the earthquake. The second quarter result, after 17% income tax, was a positive US$ 18 million, reflecting the resumption of both facilities.

For the third quarter, the post 17% income tax earnings were US$ 62 million, showing the effect of the refineries’ functioning at normal average capacity and the inclusion of insurance claims with respect to earthquake damage. In line with the third quarter’s result, earnings for the last quarter, after 17% income tax, were US$ 83 million, mainly due to the improvement in international refining margins.

The gross margin as of December 31, 2010 was US$ 246 million, a figure slightly lower, by US$ 32 million, than that in December 2009. The margin reduction is mainly explained by the effect on the business of the stoppage of operations at ENAP’s refineries due to the effects of the earthquake, and partly to the reduced international refining margins in 2010, compared to the year before.

Earthquake Effects

The earthquake that hit the country’s center-south region in the early morning of February 27 caused alterations to the operations of the Bío Bío and Aconcagua refineries, mainly due to electricity cuts and structural damages that caused us to stop production for safety reasons.

Both refineries were subjected to rigorous inspections to establish the amount of the damage and determine the measures necessary for resuming operations safely. The repairs made enabled the Aconcagua refinery to resume operations in March, while the Bío Bío refinery, which suffered more serious damage, was not able to start operating until June 22, 2010. The group presented insurance claims for damages to property, damages due to stoppages and civil damages arising from the earthquake. These claims are currently being settled and advances against these claims have already been received.

The financial statements as of December 31, 2010 include the amounts claimed, equivalent to US$ 98.4 million (revenue). These are shown as a) a reduction in the cost of sales of US$ 38.7 million (interruption of business) and b) US$ 38.0 million under Other gains (losses), which correspond to US$ 59.7 million of insurance claims for physical damages less US$ 21.6 million as impairment of the fixed assets damaged.

Prices of crude and refined products

The average price of West Texas Intermediate (WTI) international benchmark crude was US$ 79.6 per barrel in 2010, a rise of 28.2% over that of the previous year (US$ 62.1 per barrel). The principal explanation for the crude-oil price is the increased demand from emerging countries.

In 2010, the average prices of gasoline and diesel on the United States Gulf Coast international market were US$ 86.2 and US$ 90.7 per barrel respectively. Gasoline prices rose by 25.3% and diesel by 29.6% compared to the average prices of 2009.

Assets, financial debt and EBITDA

ENAP’s total assets showed a moderate rise of 3.15%, from US$ 5,560 million at December 2009 to US$ 5,733 million as December 31, 2010. The increase is mainly explained by higher inventories and accounts receivable as a result of the international prices of crude and products.

Total liabilities as of December 31, 2010 amounted to US$ 5,277 million. ENAP’s financial debt plus interest-bearing suppliers’ credits amounted to US$ 4,135 million, 3.0% more than the debt level of US$ 4,016 million at the end of 2009.

The increase was mainly due to the valuation of domestic bonds outstanding due to the depreciation of the dollar in 2010 (exchange rate of Ch$507.10 at December 31, 2009 and Ch$468.01 at December 31, 2010) and larger working capital needs as a result of the 28.2% increase in crude prices and of 25.3% and 29.6% in the prices of gasoline and diesel respectively.

ENAP’s EBITDA for 2010 were US$ 402 million.