PKN ORLEN’s Q1 2015 consolidated financial results
PKN ORLEN benefits from low crude oil prices. In Q1 2015, PKN ORLEN generated LIFO-based EBITDA of PLN 1.9bn. This good performance is attributable both to the supportive macroeconomic environment (higher downstream margin, low oil prices), and to the Company’s improved efficiency and year-on-year growth in sales volumes in the Downstream and Retail segments. In the Power segment, the growth-oriented industrial cogeneration projects in Włocławek and Płock were continued. Despite the adverse impact of lower crude oil prices on the Upstream segment, average daily production from the Canadian assets reached 6,700 boe/d, with rationalised expenditure in this business area. Over the first three months of 2015, PKN ORLEN reduced its debt by PLN (-) 0.6bn. The Company continued its dividend policy, and the Management Board recommended distribution of dividend of PLN 1.65 per share.
For Q1 2015, PKN ORLEN reports:
- LIFO-based EBITDA up by PLN 0.9bn (y/y)
- Total sales growth across the segments of 9% (y/y)
- Operating cash flow of PLN 1bn
Two important drivers of the ORLEN Group’s performance in Q1 2015 were the rise in downstream margin to 12.6 USD/bbl, and sales volume growth by a total of 9%. In the period, the average price of Brent crude oil fell by 54 USD/bbl year-on-year, while the average PLN/USD exchange rate deteriorated and the PLN/EUR exchange rate remained stable. Higher diesel oil consumption was seen across PKN ORLEN’s markets, and in Poland, Germany and the Czech Republic gasoline consumption went up as well. LIFO-based EBIDTA grew by PLN 0.9bn, to PLN 1.9bn on the back of improved performance of the Downstream segment and a record-high profit delivered by the Retail operations.
"The results generated in the first quarter are proof of our flexibility and successful capturing of the opportunities created by the favourable market environment. This is particularly manifest in the 9% growth in our total sales volumes. In the previous quarter, historically a weaker period than the rest of the year, we reported excellent results in the Downstream and Retail segments at all home markets. With an unwavering focus on maximising performance in our core business areas, we are also proceeding with growth-oriented initiatives and implementing our key investment projects in line with the schedule," said Jacek Krawiec, PKN ORLEN’s CEO.
The first three months of 2015 proved yet another excellent period for the ORLEN Group’s Retail segment: its LIFO-based EBITDA was up by PLN 49m year-on-year, to PLN 283m – a record-high first quarter performance. PKN ORLEN’s retail sales volumes grew by 4% year-on-year, with an increase in market shares seen in Poland and the Czech Republic. The rise in retail sales volumes was supported by a year-on-year improvement in fuel margins on the German and Czech markets (the margins remained broadly flat in Poland and Lithuania), as well as a year-on-year improvement in non-fuel margins across all markets. At the same time, PKN ORLEN consistently developed its non-fuel sales network, which included a total of 1,277 Stop Cafe and Stop Cafe Bistro outlets in Poland at the end of Q1 2015 – 196 more year-on-year.
The ORLEN Group’s Downstream segment posted a LIFO-based EBITDA of PLN 1.7bn for Q1 2015, up by PLN 920m (y/y). Sales increased by 10% year-on-year as new trading partners were acquired in Poland, the situation on the Czech market improved, and ORLEN Lietuva’s inland and marine sales grew. The performance was driven by favourable macroeconomic conditions, including primarily an increase in model downstream margin of 3.1 USD /bbl (y/y) and a 22% weakening of the złoty’s average exchange rate against the US dollar. In Q1 2015, the Czech Antitrust Office gave final clearance for the acquisition by Unipetrol of shares in Česká Rafinérská from ENI of Italy, which is an event of key importance to the further development of the ORLEN Group’s petrochemical assets.
In Q1 2015, PKN ORLEN consistently pursued its strategy providing for development of its power-generation assets to support the Downstream segment. In Włocławek, work continued on the 463 MWe CCGT unit, which included assembly of all ancillary, electricity and automation systems, as well as hook-up of gas and power connections. A test start-up of the unit in Włocławek is scheduled for the second half of the year, with electricity sales expected to begin in late 2015 or early 2016. In Płock, where a similar, 596 MWe project is being executed, design work and negotiations with the contractor were carried out alongside work on the Płock Production Plant’s infrastructure. The CCGT unit is scheduled to come on stream in late 2017.
In the Upstream segment, the ORLEN Group’s Q1 2015 LIFO-based EBITDA came in at PLN 14m. The PLN 17m year-on-year decrease in this metric was due to maintenance work on transmission infrastructure in the Canadian province of Alberta and alignment of production with the prevailing situation on the oil and gas market. In the same period, work in Canada included the spudding of 2 new wells (1.6 net − adjusted for other partners’ interests), 6 fracturing operations (4.2 net), and bringing of 1 well (0.7 net) on stream. The average daily output of hydrocarbons in the period amounted to 6,670 boe/d, up 80% on the same quarter of the year before.
As regards PKN ORLEN’s conventional licences in Poland, at the end of Q1 2015 two appraisal wells were drilled under the Sieraków project, and one exploration under the Karbon project. Preparations were also in progress to develop a part of the Sieraków project area, as part of which a preliminary development concept, geological assessment and project documents were produced. Under the Karbon project, preparations were made to acquire 3D seismic over the Lublin licence area. As part of unconventional projects pursued by PKN ORLEN in Poland, a vertical well was drilled within the Wołomin licence area. In addition, preparations were under way to fracture a well under the Wierzbica licence and to acquire 2D and 3D seismic over the Wodynie-Łuków and Wierzbica licence areas. Also, acquisition of 2D seismic commenced under the Sieradz licence.
In the first quarter of the year, a supportive macro climate combined with our steadily growing efficiency allowed us to post robust cash flows. Thanks to our sound financial standing, we are again able to recommend dividend payment to the General Meeting - said Sławomir Jędrzejczyk, Vice-President of the PKN ORLEN Management Board, Chief Financial Officer.
In Q1 2015, the Company was commended by a number of independent expert bodies, primarily on its employment policy and ethical conduct of business. PKN ORLEN still remains the only CEE name ranked among the world’s most ethical companies and was again recognised by Ethisphere Institute as The World’s Most Ethical Company 2015. Its sustainable employment policy, on the other hand, earned the Company the titles of Top Employer Poland 2015 and Most Sought-After Employer 2014 in the Energy, Fuels, Mineral Production and Chemicals category.