PKN ORLEN’s consolidated financial results for Q3 2017
FURTHER SALES GROWTH AND RECORD THIRD-QUARTER RESULTS
PKN ORLEN closed the third quarter of 2017 with LIFO-based EBITDA in excess of PLN 3bn, an over PLN 800m year-on-year improvement. This excellent performance was driven by a 10% year-on-year growth in sales volumes and record crude throughput, supported by a strong macroeconomic backdrop. PKN ORLEN consistently delivered on its expansion strategy adopted in December 2016. The Company paid dividend of PLN 1.3bn, or PLN 3 per share, its highest ever distribution to shareholders. It continued to diversify its funding sources, by issuing the first series of retail bonds of PLN 200m under a debt securities programme worth PLN 1bn. PKN ORLEN was ranked 43rd in the S&P Global Platts ranking of 250 top global energy companies, having moved up 15 places over the year.
Key third-quarter 2017 highlights:
- LIFO-based EBITDA of PLN 3bn
- Operating cash flow of PLN 2.9bn
- 19% year-on-year increase in crude oil throughput
- 10% year-on-year growth in sales volumes
- 17% year-on-year revenue growth
In the third quarter, the model downstream margin expanded by USD 2.9/bbl (y/y), while average Brent price moved up USD 6/bbl (y/y), and average PLN exchange rates strengthened against both USD and EUR. Diesel oil consumption increased year on year across the Company’s home markets, with a 14% growth in Poland. Gasoline consumption rose year on year in Poland, Germany and Lithuania, and remained stable in the Czech Republic.
“What pleases us most is another quarter of record performance, achieved on a sustained strong growth in fuel consumption in the home market. This means that the introduction of regulatory curbs on the grey market has had a positive impact on fuel trade, but also that their effective enforcement is bringing further tangible effects, benefiting all legitimate market participants, consumers and the state budget,” said Wojciech Jasiński, President of the PKN ORLEN Management Board.
The Downstream segment’s Q3 2017 LIFO-based EBITDA came in at PLN 2.5bn, an increase of PLN 815m year on year. It was achieved on the back of a 19% year-on-year rise in crude throughput, leading to an 11% year-on-year increase in total sales volumes, including 9% in diesel oil, 21% in LPG, 54% in olefins, 217% in polyolefins, 20% in fertilizers, 56% in PVC and 17% in PTA. Stronger margins on refined products, olefins and plastics were partly offset by tighter margins on polyolefins, PTAs and fertilizers, combined with the appreciation of the Polish złoty.
The Retail segment delivered a stable LIFO-based EBITDA for the third quarter, of PLN 610m. Sales volumes were up 8% year on year, supported by stronger (y/y) non-fuel margins in Poland and the Czech Republic, partly offset by declining fuel margins in Poland, the Czech Republic and Germany. The retail market share in the Czech Republic increased by a further 2.3pp year on year, with the shares in other markets largely unchanged. During the third quarter, PKN ORLEN continued to roll out its range of non-fuel products and services, with around 1,753 Stop Cafe outlets at the period’s end, including 1,552 in Poland (of which 117 feature convenience stores in the new O!Shop format), 178 in the Czech Republic, and 23 in Lithuania. In early October, the Company provided car-sharing service for its customers in another two cities, Wrocław and Poznań, which means that it is now available at 50 service stations. Plans were also announced to launch 36 on-site bike-share stations in six cities next spring. With these projects, the Company has reaffirmed its commitment to building a universal service station format to meet diverse customer needs.
In the third quarter of 2017, the average production of hydrocarbons at the ORLEN Group grew again, by 18% year on year, to 16.7 thousand boe per day, driving up LIFO-based EBITDA to PLN 53m. In Poland, the average production was down 0.2 thousand boe/d as a result of scheduled downtime for maintenance and measurement. In the third quarter, the Miłosław E field came on stream, two new exploration wells were spudded, further seismic data was acquired and processed, and preparations for further work were under way. In Canada, six wells (2.9 net) were spudded, two wells (1.3 net) were fractured, and two wells (1.6 net) were brought on stream. In the Kakwa region, preparations were made to expand the gas pre-treatment facilities, and work was continued to construct a water storage system. In the Ferrier area, work was under way to construct a pipeline for the supply of liquid hydrocarbons. PKN ORLEN’s oil and gas reserves (2P) currently total 114m boe, including 11m boe in Poland and 103m boe in Canada.
In line with the strategic development vision, the Company is consistently expanding its power generation business based on cogeneration. After the construction phase of the modern CCGT project in Włocławek was completed in the second quarter, the Company proceeded to commission the 600 MWe CCGT plant in Płock. After the latter is placed in commercial operation, PKN ORLEN will produce about 7 TWh of electricity, accounting for 4.5% of Poland’s total electricity output. The electricity produced in Płock will be sold to external customers, including end users, while the entire steam output will be supplied to the Group’s refining assets.
In the third quarter, the Company generated operating cash flow of PLN 2.9bn, reducing its net debt by PLN 0.6bn (q/q) and lowering financial leverage to 1.7%. As part of its continued effort to diversify financing sources, the Company issued the first series of bonds under a new retail bond programme, with a nominal value of PLN 200m. The issue again attracted strong investor interest and was more than twice oversubscribed. On October 19th 2017, the Series A bonds were floated on the WSE’s Catalyst market, in line with the Company’s long-term plans for the securities market in Poland, which envisage PKN ORLEN’s significant contribution to its development and activity.