Q3 2017 saw further significant improvement in LOTOS’ operating and financial performance. The Company increased revenue and profits, while considerably lowering its debt. It is consistently pursuing the safe and sustainable growth strategy for 2017−2022 by taking further steps, such as diversification of feedstock supply sources and implementation of innovative projects, including research on second- and third-generation biofuels, hydrogen technologies and electric mobility. In September 2017, LOTOS declared that it would build 12 electric vehicle charging points at its stations on the Gdańsk – Warsaw route. Like other innovative projects, the investment was co-funded by the EU.
LOTOS’ historical performance
In Q3 2017, the LOTOS share price on the Warsaw Stock Exchange appreciated from PLN 51 to PLN 60. The Company’s market capitalisation exceeded PLN 11bn. In Q3 2017, revenue amounted to PLN 6,263m, compared with PLN 5,660m in Q3 2016 (up 10.6%). In the first three quarters of 2017, the LOTOS Group generated a consolidated LIFO-based EBITDA of nearly PLN 2.3bn, a 32% increase on 2016, with the Downstream and Upstream segments accounting for over PLN 1.6bn and over PLN 0.6bn, respectively.
Capitalisation PLN 11m
Kapitalizacja 11 mln PLN
LIFO-based EBITDA PLN 926m
Net debt/LIFO-based EBITDA 1.1x
EBITDA LIFO 926 mln PLN
Dług netto/EBITDA LIFO 1,1x
Przychody ze sprzedaży
6,3 mln PLN
PLN 619m (+63%)
619 mln PLN (+63%)
Crude oil processing
2,8 mln ton
In 3Q 2017, the Company earned LIFO-based EBITDA of PLN 926m, a 38% increase year on year. LIFO-based EBIT was PLN 768m, up 85% year on year, while consolidated net profit came in at PLN 619m, up by 63% year on year and by as much as 292% quarter on quarter.
In September, the Company posted an all-time high model refining margin of USD 10.4/bbl. In Q3 2017, the margin was USD 8.57/bbl, up 42% year on year. In the past quarter, the LOTOS refinery operated without any disruptions and achieved a record oil throughput of 2,784 thousand tonnes. In the first nine months of 2017, the volume of crude oil processed was PLN 6,926 thousand tonnes. Q3 2017 also saw improvement in the Upstream segment’s results: revenue reached PLN 256m, compared with PLN 245m in Q3 2016 (up 4.3%), and EBITDA was PLN 168.1m, against PLN 117m in the corresponding period of the previous year. While the segment’s performance was fuelled by increasing oil and gas prices, as well as higher sales volumes reported by LOTOS Norge, depreciation of the US dollar had a negative effect on its financial results.
The Downstream segment generated LIFO-based EBITDA of PLN 750.4m in Q3 2017, against PLN 525m in Q3 2016 (up 43%). Diesel oil sales increased 9.4% year on year, from 1.3m tonnes in Q3 2016 to 1.5m tonnes in Q3 2017.
Q3 2017 was equally successful for the Retail segment, which generated revenue of PLN 1,515m, compared with PLN 1,359m in 3Q 2016 (up 11.5%). The improvement was driven by higher sales volumes. The Group continued to benefit from the government’s successful efforts to combat the grey market and closed the third quarter with fuel sales volume of 321 thousand tonnes, compared with 295 thousand tonnes in Q3 2016 (up 8.5%). Record fuel sales were reported in July and August, when monthly sales volume for the first time exceeded 100 million litres. The LOTOS service station network can boast a double-digit sales growth also in the non-fuel segment (FMCG, food services). The increase in sales volumes was organic – the number of service stations remained unchanged at 485.
Good financial results allowed the Group to considerably reduce its debt. At the end of Q3 2017, net debt was PLN 3.3bn, compared with PLN 4.8bn at the end of 2016 (down by PLN 1.5bn). Financial leverage was safe at 33%, relative to 56% at the end of 2016 and 74% at the end of 2015. Net debt to LIFO-based EBITDA was 1.1x, compared with 1.9x at the end of 2016 and 2.6x at the end of 2015.
LOTOS pays the first dividend in a decade
On September 29th 2017, Grupa LOTOS paid a dividend of PLN 1 per share. The funds distributed to shareholders represent approximately 18% of net profit. It should be noted that this is the second dividend paid by the Company in its 12-year presence on the WSE. The former was paid ten years ago and amounted to PLN 0.36 per share.
LOTOS committed to innovation
Innovation is the pillar of the LOTOS Group’s strategy. Thanks to innovative projects LOTOS can now boast not only one of Europe’s most advanced refineries, but also its best ever financial performance and market capitalisation.
The Company’s ambition is to become a leader in research on second- and third-generation biofuels and hydrogen technologies. The key projects currently implemented by the Company, that is HESTOR (aimed to develop a technology for storing hydrogen as an energy carrier and using it in refining processes) and UcoPure (an innovative method for purifying UCO – the paraffin fraction) are co-financed by the National Centre for Research and Development. LOTOS is also a co-founder of the Hydrogen and Clean Energy Technologies Cluster.
A flagship project aimed to introduce best available technologies at the Gdańsk refinery is the EFRA Project, worth more than PLN 2.3bn, which will allow LOTOS to significantly reduce its output of heavy fuel oil, while increasing yields of high-margin products by more than 900 thousand tonnes, with an extra margin of some USD 2 per barrel. The current percentage of the project completion is 84%.
The Company seeks to attract external partners for its projects, for instance by participating in the Space3ac Intermodal Transportation acceleration programme of the Pomeranian Special Economic Zone, co-financed by the Polish Agency for Enterprise Development (PARP), since the beginning of September 2017. As part of this programme, LOTOS will cooperate with start-ups, which will thus have an opportunity to carry out projects in the area of hydrocarbon production, mobile technologies or security. Projects may be submitted to the programme until the end of October 2017. LOTOS is also consistently building a corporate culture of innovation, effectively promoting innovation among its employees.
LOTOS to electrify the route between Warsaw and Gdańsk-Gdynia-Sopot
LOTOS is carefully monitoring the development of electric mobility, viewing it as a challenge. The company has already selected 50 stations along motorways and expressways where EV charging points are to be deployed. The first chargers will be launched at
12 service stations on the Warsaw-Gdańsk-Gdynia-Sopot route, along the A1 and A2 motorways, enabling electric cars to travel from the capital city to the coast. The estimated cost of the project is approximately EUR 1m and will be partly covered from EU funds. Fast charging points have been available at selected LOTOS stations in Gdańsk, Gdynia and Sopot since 2015.
Diversification of crude supply sources as a vital strategic element
LOTOS is consistently pursuing its strategy to diversify feedstock supplies. In each case, a decision to buy a particular type of crude from a particular source is based on an analysis of process efficiency and economic viability. In the first half of November, the Gdańsk refinery will receive the first barrels of US crude. In September, for the first time in its 40-year history, LOTOS imported oil from Canada. Earlier, the Company tested also oil from Iran.
Reorganisation of the Upstream segment – G. Graham as President of LOTOS Upstream
In accordance with previous announcements, LOTOS continues to reorganise its exploration and production business. In recent days, the Supervisory Board appointed Dr. Gavin Graham as President of the Management Board of LOTOS Upstream, a new company responsible for this segment. Dr. Gavin Graham is a manager with 35 years of international experience in the Oil & Gas industry, with the LOTOS Group since February 2017.
Establishment of LOTOS Upstream has been part of LOTOS strategy for 2017−2022. The purpose of the newly established company is to develop exploration and production in the North Sea and the Baltic Sea basin, and to increase hydrocarbon production to 30,000−50,000 boe/d in the period covered by the strategy.
Grupa LOTOS purchases gas from PGNiG
Yesterday, LOTOS and PGNiG signed a new contract for the supply of gas fuel. The contract will be effective until September 30th 2020, with an option to extend the period for two more years. The total value of the contract over a five-year term may reach approximately PLN 3.1bn. The contract is a continuation of cooperation started in 2010.
LOTOS builds second gas pipeline in the Baltic Sea
On October 20th 2017, LOTOS completed another stage of constructing the 75km-long gas pipeline connecting the production centre on the B8 field with the Group’s CHP plant in Władysławowo. Its construction started in 2016. In total, 75 km of pipelines were laid. The gas pipeline terminates on the LOTOS Petrobaltic rig. The next step is to perform tightness tests and secure the pipeline with concrete mattresses. The natural gas separated from crude oil produced from the B8 field will be used to produce power for Władysławowo.
Grupa LOTOS S.A.
ul. Elbląska 135,
tel. 58 308 87 31, 58 308 83 88, 58 308 83 55,