In the first half of 2018, the LOTOS Group earned more than PLN 850m in net profit (up 50% year on year). During the period, the Gdańsk refinery processed over 5 million tonnes of crude oil (25.5% more than a year before), 36% of which was imported from countries other than Russia. Despite lower refining margins and depreciation of the US dollar against the złoty, the LOTOS Group generated a consolidated LIFO-based EBITDA of almost PLN 1.4bn.

Consolidated operating profit (EBIT) for H1 2018 came in at PLN 1.35bn, up 79.6% yoy. As at June 30th 2018, the Company’s net debt stood at PLN 4.48bn and its net debt to equity ratio was 24.8%. Net debt to adjusted LIFO-based EBITDA was 0.9x (June 30th 2017: 1.4x).

In H1 2018, Grupa LOTOS’s consolidated operating results remained virtually unchanged year on year despite macroeconomic headwinds. The key parameter, i.e. LIFO-based EBITDA adjusted for one-off items, was close to PLN 1.4bn, attributable to the continued high operational efficiency of the downstream segment and solid performance of the upstream segment.

At the end of June 2018, the Annual General Meeting of Grupa LOTOS S.A. passed a resolution on distribution of the Company’s net profit for 2017. The AGM decided that almost PLN 185m would be allocated for payment of dividend. The gross dividend per share was set at PLN 1, and the dividend payment date – for September 28th 2018.

Hydrocarbon production in line with the strategy

Thanks to effective management and cooperation with reliable partners on the Norwegian Continental Shelf, total production volume was above the target levels defined in the strategy (approximately 22,000 boe/d). In the second quarter of 2018, daily oil production in Norway, Poland and Lithuania amounted to 22,700 boe, up 3.6% quarter on quarter. In the entire H1 2018, daily hydrocarbon production volume was 22,330 boe.

In Q2 2018, the capital restructuring of the Upstream segment was nearing completion. In early April, the assets of the Baltic Gas project (development of the B4 and B6 gas fields in the Baltic Sea) were transferred from LOTOS Petrobaltic to LOTOS Upstream. At present, in addition to Baltic Gas assets, the structure of LOTOS Upstream comprises also: LOTOS Geonafta, LOTOS Exploration & Production Norge, and LOTOS Upstream UK.

In H1 2018, LOTOS Upstream produced a total of over 4 million boe. Upstream delivered a clean operating profit of just under PLN 176.4m for Q2 2018 (up 32.6% year on year) and adjusted EBITDA of PLN 236.7m (up 11.2% year on year). The increase was supported by higher prices of crude oil (up 50.4% yoy) and natural gas at the UK National Balancing Point (up 50.9% yoy), which at the same time offset the effect of a lower hydrocarbon sales volume (down 12.8% yoy).

Refining and trading performance goes up

In Q2 2018, the Gdańsk refinery’s operations were stable, at full capacity, with throughput at 2.6 million tonnes of crude oil (up 19% yoy). In H1 2018, more than 36% of crude oil was sourced from countries other than Russia.

In Q2 2018, LOTOS sold about 2.9 million tonnes of petroleum products, 13.9% more than in the same period last year. The increase in sales volumes and average net selling price translated into a growth of the Downstream segment’s revenue by 39% yoy , to PLN 7.3bn. The segment’s adjusted LIFO-based EBITDA for Q2 2018 was PLN 581.7m, up 79.7% qoq and up 22.9% yoy.

In Q2 2018, the retail segment posted operating profit of PLN 33.9m (43.6% more than a year earlier). As at the end of June 2018, the LOTOS chain comprised 485 service stations. In April, LOTOS won a tender procedure for the lease of two Motorway Service Areas ( MSAs) along the S5 expressway, between Wrocław and Poznań. At present, there are 20 MSAs in the LOTOS network. Eight new service stations located within MSAs are planned to be opened by 2020. June saw the announcement of the results of the "Fleet Derby 2018" online poll. For the second consecutive time, fleet specialists and managers named LOTOS Biznes the best fuel card in Poland.

EFRA: two major units ready for start-up

As at June 30th 2018, the progress of design, procurement, construction and assembly work under the EFRA Project was 95.5% In April, construction and assembly work was completed on the Hydrogen Generation Unit (HGU) and Hydrowax Vacuum Distillation Unit (HVDU), two of the three key units of the EFRA Project. Following that, the units were ready for start-up.

The new condensate station (No. 7), the hydrowax pumping station, the SWS I (sour water stripper) unit, and all the inter-unit pipelines, including for the HGU and HVDU, were declared ready for operational testing. The installation of tanks for DCU’s intermediate products was completed and a warranty test was performed on SRU II (new Claus facilities). The LOTOS Asfalt Coking Plant’s staff amenity and office building, the oxygen generation unit (OGU), and draft cooling towers were placed in service.

As the risk associated with a delay in the coking unit’s full operational readiness materialised, negotiations continued with KT – Kinetics Technology (general contractor for the DCU/CNHT unit) to adopt a realistic work schedule. As a result of the postponed contractual deadline for achieving full operational readiness, the expected economic effects of the EFRA Project units will be reflected in full in the Group’s consolidated financial results not earlier than in the second quarter of 2019.

External Communication Department, Grupa LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland, phone: (+48) 58 308 83 88, 58 308 72 29, email: media@grupalotos.pl