Despite the volatile macroeconomic environment driven by the pandemic, the LOTOS Group was able to maintain a strong balance sheet and generate high operating cash flow. Grupa LOTOS effectively optimised the operation of its plant, both in terms of the selection of feedstock and energy carriers and the yield structure.
MARKET ENVIRONMENT AND FINANCIAL FIGURES
2021 was a year of a strong rebound, although significant volatility persisted on the market. Consumption of fuels in Poland totalled 34.6 million cubic metres, an increase of 7.1% on 2020. With fewer pandemic-related restrictions, demand grew across all product groups.
Adjusted for one-off items, consolidated LIFO-based EBITDA for the whole of 2021 amounted to PLN 4.23 billion vs 1.36 billion the year before. This impressive increase was fuelled by improved gas and oil prices in the exploration and production segment, and higher margins for the main products of the refining and marketing segment.
Once again, LOTOS generated high operating cash flow, of close to PLN 2.9 billion. At the same time, a further reduction of financial debt was reported. As at December 31st 2021, net debt stood at PLN 0.67 billion, compared with PLN 1.93 billion as at December 31st 2020, and the ratio of net debt to adjusted EBITDA fell to 0.16x, from 1.42x as at the end of 2020.
In 2021, the LOTOS Group earned revenue of more than PLN 33.1 billion. The majority of this figure, i.e. 96%, was generated by the refining and marketing segment. Net profit came in at PLN 3.21 billion.
EXPLORATION & PRODUCTION
In 2021, the LOTOS Group’s average daily production of crude oil and natural gas was 17,300 boe. Adjusted LIFO-based EBTDA of the exploration and production segment reached PLN 1.22 billion vs PLN 0.47 billion in 2020, with the increase driven mainly by higher natural gas and oil prices on global markets.
In January 2021, LOTOS E&P Norge acquired three new exploration and production licenses (in the NOAKA and Sleipner areas).Towards the end of December, the first shipment of oil from the Yme field, brought on stream two months earlier, was unloaded in Rotterdam. Average production from this area over the next five years is projected at approximately 5,000 barrels per day, which will increase the total volume by almost 30%.
REFINING & MARKETING
In 2021, the LOTOS Group’s refinery processed approximately 9.9 million tonnes of crude oil into 11 million tonnes of products, operating close to maximum capacity. Diesel oil prevailed in the production structure, with an output of approximately 6 million tonnes, up 3.8% year on year. The segment's adjusted LIFO-based EBITDA was PLN 3.02 billion, compared with PLN 0.91 billion in the previous year. As at the end of 2021, 520 service stations operated under the LOTOS brand, i.e. seven more than at the end of 2020.
INVESTMENTS AND KEY EVENTS IN 2021
In 2021, Grupa LOTOS implemented its planned investments and growth projects. In February 2021, Phase 1 of a regular maintenance shutdown at the refinery began, which continued until May. Phase 2 was scheduled for spring 2022 and is currently underway.
At the refinery site, the fourth railway loading station was launched, with a daily filling capacity of 6,000 tonnes of fuels. Also, the world's first UCO Pure filtration unit was delivered to the Gdańsk plant. In September, LOTOS Oil and Kinetics Technology signed an agreement to implement the Hydrocracking Base Oils (HBO) project, designed to manufacture new high-margin products (Group 2 base oils). In partnership with the Institute of Power Engineering and the Stanisław Staszic AGH University of Science and Technology of Kraków, Grupa LOTOS launched VETNI, a new high-performance hydrogen project to develop a highly efficient solid oxide electrolysis (SOE) unit for high-purity hydrogen production, powered with renewable energy.
One of the key areas of activity of Grupa LOTOS in 2021, aimed at ensuring the continuity and stability of crude oil supplies, was the diversification of the supply sources, supply directions, oil types and suppliers. The LOTOS refinery benefits from a unique combination of supply channels, with the feedstock delivered by land via the PERN pipeline network, and by sea through Naftoport. As part of the strategic efforts to diversify crude supplies for the Gdańsk refinery, the plant received the first delivery of Nigerian Forcados crude.
MERGER WITH PKN ORLEN
2021 saw the achievement of important milestones in the process to build a multi-energy group. In March, the Management Board of Grupa LOTOS gave a general approval for internal organisational measures. On May 12th 2021, cooperation agreements were signed between Grupa LOTOS, PKN Orlen, PGNiG and the State Treasury. Another milestone was the Extraordinary General Meeting of Grupa LOTOS held on October 14th 2021, which approved changes to the organisation of the LOTOS Group proposed by the Management Board, and the disposal of assets as part of implementation of the remedies. An intra-group reorganisation project involving integration of the entire refining complex in a single company, LOTOS Asfalt, was completed at the beginning of November.
For more information on Grupa LOTOS financial performance in 2021, see www.inwestor.lotos.pl.