Consolidated Q3 2023 results posted by the combined ORLEN Group

“The results we achieved in the three quarters of 2023 are in line with the profit growth outlook assumed in our strategy, and show the wise choice and successful pursuance of our development directions. The decision we made to venture into new markets is now delivering tangible outcomes. Through strategic mergers, we recorded substantial growth in retail sales volumes, primarily in the Czech Republic, from which we supply fuel to our new stations in Hungary and Slovakia. By building a robust and diversified business organisation, we have acquired the agility needed to navigate market challenges and maintain financial stability, even in the face of a challenging macroeconomic environment. And this financial stability empowers us to carry out our strategic vision, which includes the largest investment programme ever undertaken by the ORLEN Group. In the first nine months of this year alone, we allocated more than PLN 20bn to capital expenditures,  setting a new record that is expected to significantly increase by the end of the fourth quarter. These investments are aimed at solidifying our global presence and enhancing our appeal for potential business partnerships, particularly in the fields of energy and upstream ventures. And this is further enhancing ORLEN’s value for our Shareholders,” says Daniel Obajtek, CEO and President of the Management Board of ORLEN.

In the third quarter of 2023, the ORLEN Group generated:

Revenue of PLN 75.4bn

LIFO-based EBITDA of PLN 8.2bn

Net profit of PLN 3.5bn

In the previous quarter, the ORLEN Group was consistently engaged in strategic transformation projects aimed at generating enduring value for the organisation. Energy remained a central pillar of its investment strategy. Notably, this commitment materialised with the launch of construction of Baltic Power, Poland’s pioneering offshore wind farm, complemented by the development of an installation terminal in Świnoujście. In addition to offshore, the Group also extended its dedication to onshore renewable energy through a conditional agreement to acquire an additional 60MW of wind farms, located in the regions Greater Poland and Western Pomerania.

Pursuing its plan to diversify into new business lines, ORLEN signed an agreement with Horisont Energi, laying the groundwork for potential collaboration on one of the most advanced carbon storage projects on the Norwegian Continental Shelf. A partnership was also forged with Yokogawa Europe to develop a integrated system for synthetic fuel production, presenting an opportunity for the aviation sector in Poland to achieve a carbon neutral footprint.

Simultaneously, as part of the Group’s broader biofuels initiative, an UCO FAME plant was launched in Trzebinia to produce second-generation biocomponents from used cooking oils. This green project is part of the ORLEN Group's strategy in the area of biofuels, enabling the replacement of fossil fuels with fuels made from waste materials. Esters produced at the UCO FAME plant generate 83% less emissions than conventional diesel oil. ORLEN also signed a contract to set up an advanced oil mill in Kętrzyn, which will process 500,000 tonnes of rapeseed and produce 200,000 tonnes of oil annually for the production of low-carbon biofuels. In the city of Poznań, testing commenced on the Group’s first publicly accessible hydrogen station in Poland, and the first hydrogen-powered locomotive was added to ORLEN’s railway fleet.

The key development in Retail was the European Commission’s decision to allow the acquisition of 266 service stations in Austria. A rebranding of 90 stations in Slovakia was completed as part of the effort to standardise the ORLEN brand in Europe, and a further rebranding phase was launched in Germany, with 100 stations under the ORLEN brand to operate by early 2024.

To expand the hydrocarbon upstream business, PGNiG Upstream Norway began production from the Tommeliten Alpha field. It will provide the Group with an additional 0.5 billion cubic metres of natural gas annually, to be delivered to Poland via the Baltic Pipe pipeline.

The Group also commenced the process of taking control over System Gazociągów Tranzytowych, the operator of transit pipelines. The largest investment in domestic gas storage also began with the expansion of the Wierzchowice Underground Gas Storage Facility, and regasification capacity at the FSRU, planned to be constructed in 2028 in the Gdańsk Bay, was reserved. The ORLEN fleet was joined by two modern LNG carriers, christened as ‘Saint Barbara’ and ‘Ignacy Łukasiewicz’.

A conditional share purchase agreement was also signed for ENERGOP, a manufacturer of pipelines for the refining, petrochemical and other sectors. The transaction would improve the ORLEN Group’s potential in industrial project development, where advanced pipelines play a major role.

The strength of the combined ORLEN Group was confirmed by the list of the world’s 500 largest companies by revenue, compiled by the American magazine Fortune and published in August 2023,  in which ORLEN advanced by a historic 208 positions.  As the largest enterprise in the CEE region, it was also ranked among the top five fastest-growing companies. The ORLEN Group is currently ranked 216th in this prestigious list.

Despite allocating billions of złoty to new investments, in the third quarter of 2023 the Group managed to reduce its debt by PLN (-)6.1bn (y/y), with the ratio of net debt to EBITDA at (-)0.08x. As a result of the successful mergers with Grupa LOTOS and PGNiG as well as strong financial fundamentals, ORLEN’s highest ever ratings were maintained: A3 from Moody’s Investors Service and BBB+ from Fitch Ratings.

The ORLEN Group’s sound financial position and consistent delivery of business goals across all segments made it possible to make a record-breaking dividend distribution of PLN 5.5 per share for 2022, as recommended by the Management Board,  aggregating to nearly PLN 6.4bn paid out to Shareholders on August 31st 2023.

The Refining segment generated LIFO-based EBITDA of PLN 1.9bn. Of this amount, PLN 221m was the LIFO-based EBITDA delivered by the acquired LOTOS Group. 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, which led to a (-)USD 8.4/bbl (y/y) decrease in the differential, a negative effect of hedging transactions, and an appreciation of the złoty against the US dollar. The ORLEN Group refineries operated at 94% of capacity, processing 10 mt of crude. The Group recorded a 2% year-on-year drop in sales, with sales of gasoline up by 10% and of jet fuel up by 19%, and sales of diesel oil, LPG, and heavy fuel oil down by 5%, 1% and 11%, respectively. Sales fell 7% in Poland, 18% in the Czech Republic and 37% in Lithuania.

The ORLEN Group will allocate nearly PLN 14bn this year to freeze gas prices for households and vulnerable consumers. This is one of the reasons behind the upstream segment’s result of PLN (-)212m for the third quarter. It was also significantly affected by declines in hydrocarbon prices, including gas by more than (-)80% (y/y) and oil by (-)14% (y/y). Average oil and gas production in the third quarter of 2023, mainly in Poland and Norway, was about 155,000 boe/d.

Due to microeconomic headwinds, including a downturn in demand for petrochemicals, the Petrochemicals segment’s third-quarter LIFO-based EBITDA was PLN (-)136m. However, the value of the 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.

In the third quarter of 2023, the Energy segment’s EBITDA came in at over PLN 1.3bn, including PLN 837m attributable to the acquired Energa and PGNiG Groups. In that period, over 60% of the energy was generated by renewable and gas-powered sources. Total energy output of the ORLEN Group was 2.8 TWh of electricity and 12.9 PJ of heat.

The Retail segment posted EBITDA of PLN 601m for the third quarter of 2023. The result was achieved on the back of a 10% increase in sales over the period, as gasoline sales rose by 9%, diesel oil sales by 12%, and LPG sales by 4%.  Sales grew the most in the Czech Republic – by 61%, Poland – by 9%, and Lithuania – by 6%, while Germany saw a decrease of (-)4%.

The ORLEN Group’s retail network expanded by 255 fuel stations year on year to a total of 3,153, primarily in Poland, Hungary, and Slovakia. This growth is a result of the implementation of remedies related to the acquisition of the LOTOS Group, in Slovakia – of the launch and rebranding of self-service stations acquired from a local chain, and in Germany – of the launch of self-service stations acquired from OMV. The Group also received clearance from the European Commission to acquire 266 stations in Austria and is currently finalising the deal. The number of non-fuel sales outlets increased year on year by 273, to 2,596, including: 1,912 in Poland, 342 in the Czech Republic, 190 in Germany, 72 in Hungary, 49 in Slovakia, and 30 in Lithuania. ORLEN’s alternative fuel infrastructure is also rapidly expanding. The number of alternative refuelling points available to customers has grown to 701, including 532 in Poland, 142 in the Czech Republic, 18 in Germany and 9 in Hungary. ORLEN is also investing in the courier services segment – the ORLEN Paczka service is now available at more than 9.6 thousand pick-up and drop-off points across Poland.

Following the merger with the PGNiG Group, in the nine months to September 30th 2023 the Gas segment posted EBITDA of PLN 5.2bn. Gas imports to Poland in the period amounted to 43.8 TWh, with LNG accounting for 41% of the total. Fifteen gas carriers were unloaded at the Świnoujście LNG Terminal. As at the end of September, the ORLEN Group’s gas storage inventory was 36.6 TWh, and gas storage facilities in Poland were 99% full. To support Polish businesses, ORLEN reduced gas prices for business customers, which in September fell to PLN 201/MWh.