First-quarter 2023 earnings delivered by combined ORLEN Group support execution of strategic investments in reliable and affordable energy

Retail segment’s contribution to the ORLEN Group’s first-quarter result was insignificant due to a decline in fuel margins, among other factors. Sales at service stations in Poland accounted for just around 1% of LIFO-based EBITDA. Earnings of the refining segment were also down by half compared with the prior quarter. The combined ORLEN Group generated more than PLN 110bn in revenue, with a net profit margin of only 8% (PLN 9.2bn), with the proportion close to the level posted prior to the war in Ukraine. The Group invests its profits. This year, it will spend a record amount of PLN 36bn on projects aimed to permanently improve Poland’s and the region’s energy security and independence. Zero- and low-carbon power generation projects will be continued. The scale-up of the combined ORLEN Group’s operations will also increase tax revenue streams to the state budget. In the first three months of 2023, PKN ORLEN – Poland’s largest tax payer – already paid PLN 16.5bn to the public purse, significantly contributing to the country’s economic and social development.

- We are investing in the security and future of the Poles. We are allocating billions of złoty to carry out strategic projects to effectively deliver green transition and provide Polish families and businesses with a stable source of affordable, reliable and clean energy. The combined ORLEN Group has gained a huge springboard for further growth, and its financial results allow us to accelerate the delivery of our objective. This year, our capital expenditure reached a record amount of PLN 36bn, and will be largely allocated to renewable energy projects and safe SMR technologies. This in turn will create new jobs and bolster Poland’s economy - said Daniel Obajtek, CEO and President of the PKN ORLEN Management Board.

In the first quarter of 2023, the combined ORLEN Group reported:

  • Revenue of PLN 110.3bn 
  • LIFO-based EBITDA of  PLN 17.2bn
  • Net profit of PLN 9.2bn.

In February 2023, the Group updated its strategy until 2030, placing a strong focus on transition projects. By 2030, the ORLEN Group’s capital expenditures will total about PLN 320bn, of which approximately 40% (PLN 120bn) will be spent on green projects, including offshore and onshore wind power generation, solar photovoltaics, biogas and biomethane, biofuels, electric mobility and green hydrogen. Of that pool, PLN 36bn is already being invested this year.

As a pioneer in offshore wind power generation in Poland, ORLEN has commenced the construction of an onshore substation in the village of Choczewo, which will receive power from the Baltic Power wind farm.  A contractor for the O&M base supporting offshore wind farms in Łeba has also been selected, while LOTOS Petrobaltic has equipped Poland’s first vessel with a drilling system for geoengineering seabed surveys at depths of up to 120 metres. 

Two more solar PV farms have been put into operation: PV Wielbark (Province of Olsztyn) with a capacity of 62 MW, and PV Gryf (Province of Poznań) with a capacity of 25 MW, with plans to gradually increase their respective capacities. The ORLEN Group has also secured all required permits in the first phase of the project to construct the 65 MW Mitra solar PV farm. 

The Group is developing its hydrogen projects, with a hydrogen refuelling station launched in Prague, Czech Republic, in March this year. EU funding received by the ORLEN Group will enable the construction of five refuelling stations in Poland. The first quarter also saw the launch of Poland’s first Hydrogen Academy for students, an innovative project aiming to train and educate future hydrogen experts who will advance the hydrogen industry in Poland. 

One of the Group’s strategic energy projects is the construction of small nuclear reactors. The venture is being carried out by ORLEN Synthos Green Energy, a company formed by the ORLEN Group and its partner on the project, Synthos Green Energy. Seven potential sites have been selected this year, where further geological work is under way. By 2030, the company plans to build at least one state-of-the-art ultra-safe SMR in Poland to provide households with affordable and clean energy for 60 years, with an option to extend its life to 90 years.

In Grudziądz, the Group has launched a project to construct one of Europe’s most advanced gas-fired power plants, with a capacity of 560 MW, to be placed in service in 2025. As the expansion of gas-fired generating assets requires sufficient fuel volumes, the ORLEN Group has integrated its upstream assets in Norway and has acquired four new licences, bringing their total number to nearly 100. The outcome of exploration work carried out by PKN ORLEN in Poland has confirmed the existence of additional 500 mcm of natural gas in the Jastrzębiec field near Biłgoraj. 

The Group is expanding its own fleet of eight modern carriers to optimise LNG transport – the first ship carrying 70 thousand tonnes of liquefied natural gas from the United States arrived at the Świnoujście gas terminal in March. 

In January, the ORLEN Group signed a contract with Sempra Infrastructure whereby it is to receive 1 million tonnes of LNG per year from the Port Arthur liquefaction terminal in Texas. The contract term is 20 years, with the first deliveries expected in 2027.

The ORLEN Group is also investing in the development of the retail segment. In the first quarter of 2023, its alternative fuel infrastructure in Europe was expanded to 650 facilities, and the number of non-fuel sales outlets exceeded 2,500. 100 stations in Hungary and Slovakia have already been rebranded, and the acquisition of 17 stations in Germany was in the course of finalisation. 

Thanks to the contract for the supply of crude from Saudi Arabia, the ORLEN Group’s throughput of oil from that region has reached an all-time record level, making it the key feedstock for our refineries. Also, studies are under way to assess the viability of a joint petrochemical project in Gdańsk.

The first quarter also saw the implementation of logistics projects designed to boost Poland’s energy security. The ORLEN Group is investing more than PLN 0.5bn in a transshipment marine terminal on the Martwa Wisła river in Gdańsk, to enable the handling of more than one million tonnes of products, including base oils, marine fuels and fuel bio additives, starting from 2025.

In February, together with PERN, ORLEN brought onstream the Boronów-Trzebinia fuel pipeline section. The new 97-kilometer pipeline section improves the safety, stability and timing of diesel and gasoline deliveries to customers in the Śląsk (Silesia) and Małopolska (Lesser Poland) regions.

Despite allocating billions of złoty to new investments, in the first quarter of 2023 the Group managed to reduce its debt by PLN (-) 9.2bn (q/q), with the ratio of net debt to EBITDA at (-) 0.26x. As a result of the successful mergers with Grupa LOTOS and PGNiG as well as strong financial fundamentals, PKN ORLEN’s highest ever ratings were maintained: A3 from Moody’s Investors Service and BBB+ from Fitch Ratings, which gave PKN Orlen a two-notch upgrade. 

In view of the Group’s sound financial position and consistent delivery of business goals in all areas of activity, the PKN ORLEN Management Board has recommended dividend payment for 2022 in a record amount of PLN 5.5 per share. According to the updated strategy, the company will seek to maintain a progressive dividend policy along with an ambitious investment programme. A final decision on the dividend amount for 2022 will be made by the Annual General Meeting. If the recommended amount is accepted, in the second half of this year PKN Orlen will pay its Shareholders nearly PLN 6.4bn in dividend. 

In the first quarter of 2023, ORLEN Group’s LIFO-based EBITDA amounted to PLN 17.2bn. Revenue was in excess of PLN 110bn, driven mainly by the consolidation of the newly acquired LOTOS Group and PGNiG Group, of which 35% was generated by foreign sales. The positive impact of the merger on the Group’s performance is reflected in the results of the refining business, which recorded a 26% year-on-year increase in sales volumes and the strong global upstream segment with total 2P oil and gas reserves of approximately 1.3 billion boe (barrels of oil equivalent) per day, which increased average production by approximately 190 thousand boe (y/y). In contrast, sales at fuel stations in Poland accounted for just around 1% of the total LIFO-based EBITDA.

In the first three months of 2023, the refining segment posted LIFO-based EBITDA of PLN 5.5bn, down PLN 5.5bn (q/q), including PLN 0.9bn attributable to the newly acquired LOTOS Group. The segment’s performance was driven by supportive macro conditions. ORLEN Group refineries operated at 90% of capacity, processing 9.5 mt of crude. A 26% y/y sales growth was reported, including 21% in gasoline, 25% in diesel oil, 34% in LPG, 36% in JET aviation fuel, and 20% in heavy fuel oil. Sales rose 54% in Poland, and went down in the Czech Republic (-8%) and Lithuania (-7%).

Operating profit EBITDA of the upstream segment for the first quarter of 2023 amounted to PLN 2.3bn. The PLN 2.1bn year-on-year increase reflects mainly the consolidation of PGNiG Group’s and LOTOS Group’s results, totalling almost PLN 2.2bn. The first quarter saw a significant increase in oil and gas reserves, to 1.3 billion boe at the end of March, as well as production volumes, mainly in Poland and Norway, to around 190 thousand boe/d.

As the economic slowdown reduced the demand for petrochemicals, in the three months ended March 31st 2023 the petrochemicals segment posted LIFO-based EBITDA of PLN 98m. According to forecasts, the value of the global petrochemicals and base plastics market will grow steadily until 2030. For this reason, investment continues in the development of the segment’s assets, particularly in modern petrochemicals, including recycling.

In the first quarter of 2023, the power generation segment’s EBITDA came in at PLN 3.3bn, including PLN 2.9bn attributable to the acquired Grupa Energa and PGNiG. In that period, 60% of the energy was generated by renewable and gas-powered sources. Total energy output of the ORLEN Group was 4.7 TWh of electricity and 30.2 PJ of heat. 

Following a decline in fuel margins across all markets, in the first quarter of 2023 the ORLEN Group’s retail segment earned EBITDA of PLN 233m, down PLN -352m y/y. Sales volumes were comparable (y/y). Gasoline and LPG sales rose by 4% and 3%, respectively, while diesel oil sales fell by 3%. In the first quarter of 2023, another 244 service stations were added to the ORLEN Group’s retail network, mainly in Poland and Hungary (following the merger between PKN ORLEN and Grupa LOTOS and the implementation of remedial measures), and in Slovakia – as a result of the opening and rebranding of self-service stations acquired from a local network. Thus, at the end of March the Group’s European network comprised 3,122 service stations. The number of non-fuel sales outlets increased year on year by 230, to 2,530, including: 1,888 in Poland, 336 in the Czech Republic, 181 in Germany, 62 in Hungary, 34 in Slovakia, and 29 in Lithuania. PKN ORLEN’s alternative fuel infrastructure is also rapidly expanding. The number of alternative refuelling points available to customers has grown to 650, including 503 in Poland, 128 in the Czech Republic and 19 in Germany. The ORLEN Group is also investing in the courier services segment – the ORLEN Paczka service is now available at more than 9,000 pick-up points across Poland.

Following the merger with PGNiG, in the three months to March 31st 2023 the gas segment posted EBITDA of PLN 6.2bn. Gas imports to Poland in the period amounted to 33.1 TWh, with LNG accounting for 51% of the total. Fourteen gas carriers were unloaded at the Świnoujście LNG Terminal. The volume of gas stored by the ORLEN Group at the end of March was 11.3 TWh. The Group will allocate almost PLN 14bn this year to freeze gas prices for 7 million households in Poland and 35 thousand vulnerable consumers (such as hospitals, schools and preschools), protecting Poles against the impact of the energy crisis caused by the war in Ukraine. This will lower the heating bills of millions of Poles to PLN 200.17 per MWh. The Group has also reduced gas prices for corporate customers (including bakeries, cake shops and small businesses), which in the first quarter of the year fell by 55%, to PLN 353.56 per MWh.