ORLEN Group consolidated results for Q4 2023
In the three months ended 31 December 2023, the ORLEN Group generated LIFO-based EBITDA* of PLN 11.2bn and net profit of PLN 7.3bn. The full-year LIFO-based EBITDA* for 2023 was PLN 44.8bn and net profit reached PLN 27.6bn. The Group’s fourth-quarter results were positively impacted by the performance of the gas segment, which delivered an EBITDA of PLN 11bn, primarily on the back of lower gas procurement costs and higher sales. ORLEN also increased its retail sales volumes by more than 20% (y/y), partly as a result of the acquisition of service stations in Hungary and Slovakia.
“The results posted by ORLEN last year are in line with the Group’s strategic plans. Nonetheless, it is crucial for ORLEN to fully capitalise on the potential created through the mergers. Of particular importance is the implementation of projects that support the future of the ORLEN Group and its energy transition. We already have RES capacity of nearly 1 GW, which will be steadily expanded through investments and new acquisitions. We are also investing in hydrocarbon production and the refining and petrochemical area. ORLEN’s capital expenditure planned for this year is more than PLN 38bn, of which nearly PLN 28bn has been allocated to growth projects. We need to carry out these plans in the most efficient way, so it will be very important to select projects generating the highest returns and offering the best prospects for our shareholders,” says Witold Literacki, acting CEO and President of the Management Board of ORLEN.
In the fourth quarter of 2023, the ORLEN Group generated:
Revenue of PLN 98.3bn
LIFO-based EBITDA of PLN 11.2bn*
Net profit of PLN 7.3bn
In 2023, the ORLEN Group generated:
Revenue of PLN 373bn
LIFO-based EBITDA of PLN 44.8bn*
Net profit of PLN 27.6bn
*EBITDA before impairment losses.
In the fourth quarter of 2023, the Group’s upstream segment delivered LIFO-based EBITDA of PLN 578m. Among the factors that significantly affected the result were declines in prices of hydrocarbons, including approximately 60% (y/y) in the case of gas and 6% (y/y) in the case of crude oil. The average oil and gas production in the fourth quarter of 2023 (mainly in Poland and Norway) was about 185,000 boe/d, up by almost 20% q/q.
November 2023 saw a strategic transaction executed in the upstream segment as PGNiG Upstream Norway of the ORLEN Group assumed control of the entire operations of the hydrocarbon producer KUFPEC Norway. Following the transaction, the ORLEN Group’s natural gas output in Norway will increase by one-third, reaching over 4 bcm annually, and the daily hydrocarbon output will exceed 100,000 boe already in 2024.
Thanks to the merger with the PGNiG Group, in the three months to 31 December 2023 the gas segment posted EBITDA of PLN 11bn. This was attributable to higher wholesale sales and lower gas procurement costs, among other factors. Gas imports to Poland in the period amounted to 42.1 TWh, with LNG accounting for 47% of the total. 17 gas carriers were unloaded at the Świnoujście LNG Terminal. As at the end of December, the ORLEN Group’s gas storage inventory was 33 TWh, and gas storage facilities in Poland were 95% full. The price for business customers was 263 PLN/MWh in December.
The refining segment’s LIFO-based EBITDA for the fourth quarter of 2023 was PLN 594m. The result posted by this business line was adversely impacted by macroeconomic factors, including a change in the crude slate related to the phase-out of Russian oil and an appreciation of the złoty against the US dollar. ORLEN Group refineries operated at 88% of capacity, processing 9.5 mt of crude, down 16% year on year. The decrease was the result of consolidating 70% of the Gdańsk refinery’s throughput (compared with 100% in 2022).
As a result of lower margins on polyolefins, PTA, PVC and fertilizers, as well as the valuation of CO2 futures, the petrochemicals segment’s LIFO-based EBITDA was PLN -345m. However, the value of the European petrochemicals and plastics market is projected to grow until 2030 in line with economic growth cycles. For this reason, continued investment is planned to develop the segment’s assets, particularly in modern petrochemicals, including recycling.
The EBITDA delivered by the power generation segment for the fourth quarter of 2023 was PLN -799m. This was attributable, among other factors, to an unfavourable macroeconomic environment and one-off items. The result was also adversely affected by the Group’s participation in the mechanism of freezing energy prices for Poles in 2024.
As at the end of 2023, the ORLEN Group’s RES capacity was nearly 1 GW. As a result, in the last quarter of 2023 already more than 60% of energy was produced from renewable sources and gas-fired units. The total electricity output of the ORLEN Group was 5.3 TWh. This represents an increase of 36% (y/y) attributable, among others, to higher production from RES installations at the Energa Group and new wind farms at ORLEN Wind 3. The total heat output was 26.6 PJ.
The retail segment’s EBITDA for the fourth quarter of 2023 was PLN 633m. This result was achieved on the back of a 21% increase in sales over the period, as gasoline sales rose by 14%, diesel oil sales by 26%, and LPG sales by 3%. Sales grew the most in the Czech Republic – by 49%, Poland – by 22%, Germany – by 8%, while Lithuania saw a decrease of 33%.
ORLEN Group’s retail network expanded by 73 service stations (y/y) to 3,170, mainly in Germany as a result of the acquisition of self-service stations from OMV, and in Hungary and Slovakia following the acquisition of stations from MOL. In addition, in the first quarter of 2024, ORLEN finalised the purchase of 267 service stations in Austria, thus becoming the third largest service station chain in the country.
The number of non-fuel sales outlets increased by 146 year on year, to 2,605, including: 1,918 in Poland, 347 in the Czech Republic, 195 in Germany, 66 in Hungary, 49 in Slovakia, and 30 in Lithuania. ORLEN’s network of alternative refuelling points is also rapidly expanding. The number of such points available to customers has grown to 734, including 538 in Poland, 142 in the Czech Republic, 45 in Germany, and nine in Hungary. ORLEN is also investing in the courier services segment – the ORLEN Paczka service is now available at nearly 10,600 pick-up and drop-off points across Poland.
While allocating billions of złotys for capex projects, ORLEN maintained a sound financial standing last year. At the end of 2023, net debt remained at a safe level of PLN 1.8bn. The ratio of net debt to EBITDA was (-) 0.02x.
In 2023, ORLEN allocated a record amount of PLN 32.4bn for strategic capex projects. This demonstrates the potential of the combined ORLEN, LOTOS and PGNiG groups. Synergies resulting from the mergers reached approximately PLN 1.5bn at the end of 2023. Their effects can be seen primarily in the areas of logistics, supply chain management, oil and gas trading, and purchasing. It is estimated that by 2032 the total financial effect of the synergies will reach over PLN 20bn.
In 2024, in accordance with strategic assumptions, ORLEN will be carrying out the most important capex projects supporting the development of individual business areas. The construction of Poland’s first offshore wind farm, Baltic Power, is ongoing, and the development of the Group’s portfolio of upstream assets, including those on the Norwegian Continental Shelf, is also progressing. An expansion of the Olefins Complex is underway at the Płock Production Plant, with completion scheduled for 2027. This year, ORLEN will also be advancing hydrogen projects, including the construction of additional hydrogen refuelling stations. By the end of April this year, ORLEN will have completed the acquisition and rebranding of 63 stations, marking the final phase of the agreement with Hungary’s MOL. As a result, the total number of the Group’s stations in Poland and abroad will surpass 3,500, thereby achieving the goal set in the strategy for the development of the retail segment.