After the first three quarters of 2015, LOTOS posted a consolidated operating profit (EBIT) of PLN 743m (against a PLN 318m loss in the previous year). EBITDA (EBIT before amortisation/depreciation) for the nine months stood at PLN 1.28bn (compared with PLN 0.27bn in the previous year).
Finance
After the first three quarters of 2015, LOTOS posted a consolidated operating profit (EBIT) of PLN 743m (against a PLN 318m loss in the previous year). EBITDA (EBIT before amortisation/depreciation) for the nine months stood at PLN 1.28bn (compared with PLN 0.27bn in the previous year).
LOTOS is consistently pursuing its Efficiency and Growth Programme, which has seen it launch initial production at the B8 field and begin the investment phase of the EFRA Project.
“For LOTOS, the second half of the year was marked by active pursuit of further tasks under our key investment project – EFRA,” said Paweł Olechnowicz, President of the Management Board of Grupa LOTOS S.A. “We have closed all preparatory and contracting stages on schedule and are ready to enter the execution stage. Our refinery operates steadily and meets all production targets, which shows that we are taking the rights decisions and bodes well for the year’s final operating result. We are currently making final decisions regarding our growth strategy for 2016–2020.”
In Q3 2015, LOTOS delivered a consolidated revenue of over PLN 5.7bn (down 24.4% year on year), bringing the figure for the three quarters of the year to nearly PLN 17.5bn (down 20.2% year on year). The year-on-year decrease in revenue was caused by dwindling prices of crude oil (down 51% year on year) and petroleum products. Earnings before depreciation and amortisation (EBITDA) came in at approximately PLN 82m for the period (down 70.9% year on year), with an operating loss (EBIT) of some PLN 94m.
Performance was materially affected by the Company’s payment of approximately PLN 240m in disputed tax liabilities assessed by the Tax Audit Office in Bydgoszcz. The Company is not satisfied with the authority’s decision and lodged an appeal with the Director of the Tax Chamber in Gdańsk, expecting the amount to be reimbursed.
Yet another factor affecting the Q3 2015 result was the LIFO effect, estimated in the reporting period at approximately PLN 318m.
In line with its policies, LOTOS uses the weighted average method to measure inventories, whereby the impact of changes in crude oil prices on the prices of petroleum products is deferred. The LIFO effect is the difference between the cost of raw materials used to manufacture products calculated according to IFRS (weighted average cost method) and that based on the LIFO method, where the cost is calculated by reference to the latest available purchase prices, which gives a better picture of a fuel company’s efficiency over a period.
LIFO-based EBITDA for Q3 2015 stood at PLN 400.4m, with EBIT at PLN 224.4m.
In the upstream segment, LOTOS launched initial production from the B8 field, which is now the largest crude oil production facility in the Polish economic zone of the Baltic Sea, with production potential estimated at 3.5m tonnes of crude.
In the downstream segment, LOTOS recorded maximum capacity utilisation rates at its Gdańsk refinery, which reached 100.2% in Q3 2015 (up 8.9pp year on year).
In its retail business (service station network), LOTOS posted EBITDA of PLN 48.2m (up 21.1% year on year) and EBIT of PLN 32m (up 37.3% year on year).
EFRA progressing at full speed
Initial construction work began on the Gdańsk refinery’s premises as part of the EFRA project to prepare the site for the new units, which are to enable even more efficient processing of crude oil.
On October 9th 2015, it was confirmed that LOTOS Asfalt had met the conditions precedent to receiving funds with an estimated value of over PLN 1.9bn under a credit facility agreement. The agreement provides for a USD-denominated investment facility (TLF) and a PLN-denominated working capital facility.
Another important development was the signing of a contract for the construction of a Hydrowax Vacuum Distillation Unit (HVDU) by Grupa LOTOS S.A. and KT-Kinetics Technology (‘KT’) on October 21st 2015. HVDU will be the EFRA project’s fourth unit to be delivered by KT. The contractor undertook to complete the project by the end of January 2018. The value of the contract for the HVDU unit is approximately EUR 36m.
Oil production begins at B8
On September 30th 2015, as part of the project to develop the B8 field, initial oil production was launched using the LOTOS Petrobaltic drilling rig. The B8 field is the first Polish crude oil field on the Baltic Sea to see production in the last 20 years. LOTOS Petrobaltic will produce up to 5 thousand barrels of oil equivalent (boe) a day from the B8 field once target production levels are reached.
Launching initial production from the B8 field marks another major step by LOTOS towards strengthening Poland’s energy security and diversifying the sources of crude oil supply for the Gdańsk refinery.
Total production in Norway, Poland and Lithuania in Q3 2015 amounted to nearly 1.03 million boe (up 7.9% year on year), which translates into average daily production volumes of approximately 11.7 thousand boe.
In Q3 2015, revenue in the upstream segment was down 19% year on year and came in at over PLN 160m, mainly due to falling crude oil prices. The upstream segment’s EBITDA for Q3 2015 was PLN 73.6m (up 80% year on year), with EBIT at PLN 15.2m.
High throughput for another quarter running
In Q3 2015, the capacity utilisation rate at the LOTOS refinery in Gdańsk was 100.2% (up 8.9pp year on year). In the period under review, approximately 2,650.6 thousand tonnes of crude (up 10% year on year) were processed, with some 2,744.7 thousand tonnes sold (up 6.6% year on year). Diesel oil, gasolines, and heavy fuel oil and bitumen components were the largest contributors to sales in Q3 2015.
More service stations, better sales
As at the end of September 2015, the LOTOS retail network comprised 459 service stations. 18 new service stations, including 13 locations in the LOTOS Optima economy segment, have been added to the network since the beginning of the year. In Q3 2015, the volume of fuels sold at LOTOS service stations was above 323 thousand tonnes (up 13.2% year on year).
In the period under review, the retail segment generated revenue of close to PLN 1,540m (down 3.5% year on year). EBITDA for the period totalled PLN 48.2m (up 21.1% year on year). At the same time, EBIT reached PLN 32m (up 37.3% year on year).
Q3 2015 highlights:
- Crude oil prices down 51% year on year
- EBITDA: PLN 82m (down 70.9% year on year)
- EBIT: PLN -94m (vs 79.6m in Q3 2014)
- Oil and gas production volume: 11.7 thousand boe/d (down 7.7% year on year)
- Capacity utilisation: 100.2% (up 8.9pp year on year)
Q3 2015 macroeconomic highlights:
- Model refining margin: USD 7.41/bbl (up 6.3% year on year)
- Brent-Urals differential: USD 1.41/bbl (down 21.2% year on year)
- USD/PLN exchange rate at end of Q3 2015: up 14.5% year on year; average quarterly USD/PLN exchange rate: up 19.7% year on year
Communications Office
Grupa LOTOS S.A.
ul. Elbląska 135,
80-718 Gdańsk,
tel. 58 308 87 31, 58 308 83 88, 58 308 83 55,
e-mail: media@grupalotos.pl
