PKN ORLEN Group strategy for 2007-2012

Polski Koncern Naftowy ORLEN S.A. ("PKN ORLEN", “Company”) announces that on 16 November 2007 the Supervisory Board of PKN ORLEN accepted the document “PKN ORLEN Group’s strategy for the years 2007-2012” (“Strategy”).

The new strategy assumes the update of the current approach towards the process of value creation within the PKN ORLEN Group by focusing on two areas:
- organic growth, i.e. improvement in efficiency, optimization, and investments in the core businesses of the Company;
- inorganic growth, based on the selective realisation of the available options for external expansion.

The main assumptions of the new strategy are as follows:

1. A focus on the organic growth of the Company, i.e. on the efficiency and release of the Group’s potential, especially through:
-Synergy maximisation from the effective realisation of the Partnership Program in Unipetrol and the Value Creation Program in Mazeikiu Nafta.
- An increase in crude oil processing capacity to fulfil the growing demand in the region (reaching, by 2012, an effective processing capacity for the whole PKN ORLEN Group at the level of 33 m tonnes per year).
- An increase in wholesale market share (reaching, by 2012, 65% of the market share in Poland and 75% of the market share in the Baltic countries).
- implementation of the strategy of two brands and a significant improvement in retail sales efficiency (reaching, by 2012, more than 30% of the Polish market and a share of at least 20% of the Czech and Baltic countries’ markets).
-Asset optimisation through the further disposal of non-core business companies (especially Polkomtel).

2. Potential inorganic growth options. Priority will be given to the following projects: expansion into the new markets (among others Ukraine and the Baltic countries), consolidation of the domestic refining sector, the start of upstream activities, optimisation of crude oil trading, the strengthening of wholesale deliveries of refined products by sea, and the monitoring of potential targets for acquisition.

The strategy assumes achieving the following financial targets for the PKN ORLEN Group in 2012(1):
- EBITDA based on LIFO(2): PLN 11 bn
- ROACE(3): 14%
- Capital expenditure(4): PLN 3.5 bn annual average; PLN 21.3 bn in total
- Gearing(5): 30 – 40%

The EBITDA target for 2012 assumes an increase over its 2006 level of 132%. The breakdown of the 2012 EBITDA by PKN ORLEN Group operating segments is as follows:
- Refining: PLN 6.1 bn (increase, by 2012, of PLN 3.8 bn compared to 2006)
- Retail: PLN 1.4 bn (increase, by 2012, of PLN 0.6 bn compared to 2006)
- Petrochemical: PLN 2.5 bn (increase, by 2012, of PLN 0.9 bn compared to 2006)
- Chemical: PLN 0.6 bn (increase, by 2012, of PLN 0.1 bn compared 2006)
- Others: PLN 0.4 bn (increase, by 2012, of PLN 0.9 bn compared to 2006).

The capital expenditure target for the PKN ORLEN Group for the years 2007-2012 – breakdown by PKN ORLEN Group operating segments:
- Refining: PLN 8.4 bn
- Retail: PLN 3.2 bn
- Petrochemical: PLN 5.8 bn
- Chemical: PLN 1.7 bn
- Others: PLN 2.2 bn

(1) Targets are presented based on the following assumptions for macroeconomic conditions in 2012: PKN ORLEN model refining margin: USD 4.2/bbl, Brent crude oil price: USD 50/bbl, PKN ORLEN model petrochemical margin: USD 468/tone, Brent/Ural differential: USD 3.0/bbl, PLN/EUR: 3.67, PLN/USD: 2.84.
PKN ORLEN model refining margin = revenues from products sold (88% Products = 22% Gasoline + 11% Naphtha + 38% Diesel + 3% LHO + 4% JET + 10% HSFO) minus costs (100% input = 88% Brent Crude Oil + 12% internal consumption); product prices according to quotations PKN ORLEN model petrochemical margin = revenues from products sold (100% Products = 50% Ethane, 30% Propylene, 15% Benzene, 5% Toluene) minus costs (100% input = 70% Naphtha + 30% LS VGO); product prices according to quotations.

(2) EBITDA = earnings before tax and financial costs plus amortisation and depreciation; refers to the PKN ORLEN Group, LIFO valuation of inventories; variable macroeconomic conditions.

(3) ROACE = EBIT after tax / average capital employed (equity + net debt)

(4) Cumulative value in years 2007 - 2012 for the whole PKN ORLEN Group

(5) Gearing = net debt / equity

Details of the strategy will be introduced to capital market representatives during a press conference and conference call which are planned for 21 November 2007. Further information regarding the meetings and presentation will be available on the PKN ORLEN web-site www.orlen.pl.

See also: regulatory announcement no 35/2007 dated 12 June 2007.