On February 3rd 2015, LOTOS published its estimates of selected factors with a material bearing on the Company’s consolidated performance in Q4 2014.

The financial performance of LOTOS in 2014 was significantly affected by the strong changes on the crude oil and currency markets: the oil price slump and the resulting decline of refining product prices (oil price down from USD 111 on June 30th 2014 to USD 55 on December 31st 2014), and the appreciation of USD against PLN by more than PLN 0.20.

- Even though we recognised considerable impairment losses in Q4 2014, which were due to external circumstances and had no effect on our cash position, the financial standing of LOTOS as at the year’s end was sound, with a safe level of operating cash flows - said Mariusz Machajewski, Vice-President and Chief Financial Officer of Grupa LOTOS S.A. - Ours is a very competitive market, which is why we are committed to pursuing projects designed to strengthen our position. Having raised some PLN 1bn from our latest share issue, we are able to launch investment projects, including EFRA, which will drive long-term growth of shareholder value.”

Following a significant decline in the prices of crude oil and refining products in Q4 2014, LOTOS recognised an impairment loss on inventories of ca. PLN 0.4bn, which had a negative effect on its reported consolidated EBIT.

The remeasurement of LOTOS’ debt (denominated in USD) following the depreciation of the Polish złoty against the US dollar will reach ca. PLN 0.51bn, which, given the use of hedge accounting policies, will add an estimated PLN 0.27bn to finance costs, adversely affecting consolidated profit or loss.

It should be noted that the foreign currency debt of LOTOS is due for repayment over several years, and that the USD-denominated revenue from petroleum products is higher than the cost of crude, which is a natural hedging mechanism for the related cash flows. This is why the strengthening of USD will support the financial condition of LOTOS over a medium and long term.

Yet another factor affecting the Q4 2014 result was the LIFO effect, estimated in the reporting period at approximately PLN 0.8bn.

The LIFO effect results from the difference between the cost of raw materials used to manufacture products for sale calculated according to IFRS (weighted average cost method) and that based on the LIFO method, where the cost is calculated in reference to the latest available purchase prices, which gives a better picture of a fuel company’s efficiency over a period.

LOTOS will publish its Q4 and full-year 2014 financial statements on March 6th 2015.

Communications Office, Grupa LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland, tel. (+48) 58 308 87 31, (+48) 58 308 83 88, e-mail: media@grupalotos.pl