Adjusted LIFO-based EBITDA: PLN 2.9bn
Revenue: PLN 29.5bn
Production: 7.67 mboe
Crude oil throughput: 10.7 million tonnes
Fuel sales in Poland: 8 million tonnes
Service stations: 506

Grupa LOTOS S.A. is the second largest fuel refiner in Poland. The Company’s refinery located in Gdańsk is among the youngest, the most advanced and most environmentally friendly refineries in Europe.

In 2019, adjusted LIFO-based EBITDA was PLN 2.9bn, down 7.7% year on year. Last year, the Company paid record-high dividend of PLN 3 per share. In 2019, the macroeconomic environment for refining operations was more demanding than in 2018 and than assumed by the Company’s strategic projections. The significant decline in natural gas and crude oil prices had an adverse effect on the exploration and production segment’s performance.

In 2019, the LOTOS Group posted revenue of PLN 29.5bn. with 97.5% of the figure coming from refining operations. The Group sells its products mainly to domestic customers. Domestic sales accounted for 81.8% of total revenue.

In 2019, the Grupa LOTOS refinery processed 10.7m tonnes of crude oil and the utilisation rate of its nominal refining capacity was 102%. In 2019, the Gdańsk refinery’s product output was 11.5m tonnes. With a share of 48.0%, diesel oil prevailed in the production structure. Its output was 5.5 million tonnes, up 2.9% year on year.

Production

At approximately 81.3m boe as at the end of 2019, the LOTOS Group’s aggregate 2P oil and gas reserves were above the target. The LOTOS Group’s average production was 20.7 thousand boe/d (up 1.4% year on year). The total production volume was 7.67 mboe.

September 16th 2019 saw the start of production from the Utgard field. The project was completed approximately three months ahead of schedule, with 25% savings on the planned budget. The average production from the Utgard field in Q4 2019, attributable to LOTOS’ interest, was 7.2 thousand boe/d. As at December 31st 2019, the production share attributable to LOTOS’ interest is estimated at 5.4 mboe.

The Yme project is at an advanced development stage. The field is being developed in accordance with the approved new PDO, using the leased platform Maersk Inspirer. In 2019, work at the Egersund fabrication yard on modifying the platform was continued. It is scheduled for completion in Q2 2020, and the Operator expects that production will be launched in Q4 2020.

Service stations

As at the end of 2019, the LOTOS chain had 506 service stations (312 CODO and 194 DOFO stations). 11 sites were added to the chain (6 CODO and 5 DOFO stations). The chain

included 21 Motorway Service Area stations, i.e. motorway stations with a wide non-fuel offering. 2019 was a record year for the LOTOS station chain in terms of sales at DOFO stations, sales of fuels to fleet card customers and sales of fuels at CODO stations. In addition, a record number of cards was issued.

Delivery of the 2017-2022 strategy

The key objective of Grupa LOTOS S.A.’s strategy for 2017-2022 is stabilisation and secure growth of the Group. Over these five years, LOTOS intends to spend a total of nearly PLN 9.4bn on capex projects. PLN 3.5bn of that amount was spent in 2017-2019. In 2019 alone, capital expenditure amounted to PLN 1bn.

By focusing on cost discipline, the Group optimised its financing structure by maintaining its net debt/LIFO-based EBITDA ratio below the parameters envisaged in the strategy, i.e. below 1.5x. In 2019, net debt to LIFO-based EBITDA was 1.0x.

EFRA Project

The main investment project pursued by the LOTOS Group in 2019 was the EFRA (Effective Refining) project, which facilitated deeper and more economically viable conversion of crude oil thanks to the construction of a state-of-the-art coking unit. The main unit of the project, DCU, reached the ready for start-up (RFSU) status on June 26th 2019, which also formally marked completion of the construction. The unit was started up on September 28th and placed in service on December 1st.

Innovation

Grupa LOTOS has become one of the leaders in the development of electromobility in Poland. As part of the LOTOS Blue Trail project, 12 charging points have been placed in service along the Tricity - Warsaw route. The Company plans to open further charging stations for electric vehicles.

Under the Pure H2 project, the Company will launch the distribution of ultra high purity hydrogen (99.99%). The project envisages constructing at the Gdańsk refinery a hydrogen purification unit and a hydrogen sale and distribution station, as well as two refuelling points (in Gdańsk and Warsaw). In November 2019, Grupa LOTOS and Toyota Motor Poland signed a letter of intent to join forces in intensifying the work on technologies for the use of hydrogen in road transport.

Grupa LOTOS S.A. is also actively engaged in other projects related to new generation alternative fuels, including LNG/CNG. The Company continues to prepare documentation for the construction of a small scale LNG terminal in Gdańsk. In 2019, Grupa LOTOS S.A. and PGNIG S.A. carried out two LNG commercial bunkering operations for seagoing ships. These were the first such operations carried out at sea ports in Gdańsk and Gdynia.

As part of business and science collaboration, Grupa LOTOS S.A. commenced work under a research programme run with Budimex, Orlen Asfalt, the Gdańsk University of Technology, the Warsaw University of Technology, and the Road and Bridge Research Institute.

In 2020, the Company will seek to obtain corporate approvals set forth as conditions precedent in the preliminary agreement on equity investment in and debt financing for the Polimery Police Project.

For more information on Grupa LOTOS S.A.’s financial performance in 2019, see www.inwestor.lotos.pl.

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External Communication Department, GRUPA LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland. Tel. (+48) 58 308 72 29, (+48) 58 308 70 44. Email: media@grupalotos.pl