PLN 29,258.5m is the exact figure for sales revenue posted by LOTOS after the four quarters of 2011, an increase of close to 49% over the year before. On that revenue, we recorded PLN 1,016.5m in operating profit and PLN 654.2m in net profit.

In Q4 2011 alone net profit stood at PLN 93.8m, compared with net loss of PLN 328.6m incurred in Q3 2011.

- Last year's key developments included increased utilisation of capacities built as part of the 10+ Programme, a higher volume of crude oil processed and a rise in sales, mainly of liquid fuels, as reflected in our record-breaking revenue figure - says Paweł Olechnowicz, President of Grupa LOTOS S.A. - This year, LOTOS will go a step further, fully utilising the capacities of the Gdańsk refinery.

According to estimates released by JBC Energy, in 2012 demand for oil in Central and Eastern Europe will amount to 35 thousand bbl/d. Apart from Poland, only Russia and Turkey are expected to see a growth in demand for that commodity. In Poland, the growth is predicted to reach some 4%. It will be driven largely by increased demand for diesel oil from the transport industry.

A positive contributor to our Q4 2011 performance was the model refining margin, which stood at USD 3.88/bbl, having gone up 65.7% quarter on quarter. Additionally, in the previous quarter LOTOS recorded a rise in crack margins on mid-distillates. Crack margin on diesel oil went up by 32.5% quarter on quarter and 37.1% year on year. The quarter-on-quarter and year-on-year rises in crack margin on light fuel oil were 37.6% and 52.7%, respectively, while the corresponding figures for aviation fuel were 13.3% and 37.1%.

Drilling in Norway, shale gas in Lithuania
   
In Q4 2011, the upstream segment saw its sales revenue grow by PLN 91.1m over the year before, which was attributable to the surging prices of oil, the strengthening US dollar and a higher volume of sales reflecting the takeover of the 100% stake in LOTOS Geonafta. The volume of oil sold by the upstream segment in Q4 2011 amounted to 373.4 thousand bbl (or 48.1 thousand tonnes).
In the Baltic Sea, production of oil and gas from the B3 field continued and temporary production from the B8 field was launched. Moreover, on January 17th 2012 the Norwegian Ministry of Petroleum and Energy announced the outcome of the APA 2011 Licensing Round. LOTOS Norge was offered working interests in two licenses (PL643 and PL655) on the Norwegian Sea. The company holds a 30% interest in each of the licenses. LOTOS Norge holds a total of eight exploration and production licenses on the Norwegian Continental Shelf, being the operator of three licenses. Its work as license operator is farthest advanced in the case of license PL498, where it is preparing to drill an exploration and appraisal well (end of Q3/beginning of Q4 2012). Earlier still (in Q2 2012), an exploration and appraisal well is scheduled to be drilled within the area of license PL497, in which LOTOS Norge holds a 10% working interest. - Despite delays to work on the Yme field, the upstream segment is set to remain our strategic priority in the years 2011-2015. Hence our determination to launch production from the field as soon as possible, while continuing with our other projects, in Norway, Poland and Lithuania - explains Mariusz Machajewski, Vice-President of the Management Board, Chief Financial Officer of Grupa LOTOS S.A. In Lithuania, LOTOS is drilling four appraisal wells. In addition, on January 24th 2012, during a meeting with Lithuania's Prime Minister Andrius Kubilius, LOTOS informed him that it would be the first company to start drilling for shale gas in Lithuania.

The market and LOTOS bet on diesel oil

The winter of 2011/12 is a testing time for facilities built as part of the 10+ Programme. Even as temperatures fell to below -20°C, the newly built units were operating without major disruptions. - Winter is always the most critical time of year for the refinery. The risk of shut-downs, due for instance to false measurement readings, is graver than in other seasons - admits Marek Sokołowski, Vice-President of the Management Board, Chief Operation Officer of Grupa LOTOS S.A. - However, I am glad to say that despite the extremely low temperatures all units were operating smoothly. In January, we even processed a record high volume of oil for that time of year (786 thousand tonnes).
The utilisation rate of the refinery's installed capacities and oil throughput in Q4 2011 were similar to the levels seen in Q3 2011 and slightly higher compared with Q4 2010. This can be explained by the full utilisation of capacities installed as part of the 10+ Programme and the production mix optimisation aimed to maximise the refining margin. With two independent crude distillation lines, the Gdańsk refinery has a greater degree of flexibility in selecting crude blends to adequately respond to changing market conditions. In the discussed period, our total sales volumes rose slightly on Q4 2010 (+68.8 thousand tonnes) and were on a par with the volumes sold in Q3 2011 (+3.5 thousand tonnes). Both in Q4 and in the whole year 2011, demand for gasoline in Poland was on a downward trend. After the first eleven months of 2011, consumption of motor gasolines declined by 4.8% relative to 2010 (according to the Polish Organisation of Oil Industry and Trade, POPiHN).
The domestic market of diesel oil benefited from the fact that Poland's economy performed better than expected. As a result, after the first eleven months of 2011, demand for diesel oil grew by 8% year on year (according to POPiHN). From among all products sold by LOTOS, sales volumes of diesel oils grew the most substantially (up by 146.0 thousand tonnes) compared with Q4 2010. Demand for bitumens remained strong, chiefly on the back of mild weather favourable to road construction (relative to Q4 2010, production and sales rose by 26% and 27.5%, respectively). Moreover, a number of road construction projects entered their final phases (due, among other things, to the approaching Euro 2012 football championships), when requirement for bitumen is the highest. Thanks to transferring heavy residues for bitumen production, LOTOS limited production and sales of low-margin heavy fuel oil (HFO).

The Year of Optima

In Q4 2011, we recorded a 2.9% year-on-year rise in retail volumes, driven largely by the growth of the Polish fuel market on the record high consumption of diesel oil. July 2011 saw the successful launch of our new brand of service stations – LOTOS Optima. 45 out of the total of 50 Optima stations opened for business between October 1st and December 31st 2011. As a majority of them were launched towards the year's end, a rise in sales volumes is expected to be seen only this year. Plans for this year include rapid development of the LOTOS Optima network. By 2015, we want to secure a 10% share of the retail market. As at the end of 2011, our share in retail fuel sales was 7.6%.

Marcin Zachowicz, spokesperson for Grupa LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland, tel. +48 58 308 75 70, +48 505 050 454, e-mail: marcin.zachowicz@grupalotos.pl