The agreement for keeping of crude oil obligatory inventories has expired

Polski Koncern Naftowy ORLEN S.A. ("PKN ORLEN") informs that on 31 March 2011 the agreement for gathering and keeping of crude oil obligatory inventories (“Agreement”), concluded between PKN ORLEN and LAMBOURN Sp. z o.o. (“LAMBOURN”), expires.

Due to the abovementioned and realization of the Act of 16 February 2007 on stocks of crude oil, petroleum products and natural gas, the principles of proceeding in circumstances of a threat to the fuel security of the State and disruption on the petroleum  market (Journal of Laws no. 52, item 343) PKN ORLEN will purchase crude oil owned by LAMBOURN. The value of transaction will amount to ca. USD 421 m (i.e. PLN 1 188 m, based on the average USD/PLN exchange rate as of 31 March 2011, as stated by the National Bank of Poland). The crude oil price was established according to market quotations.

Transfer of payment by PKN ORLEN and transfer of crude oil ownership to PKN ORLEN will be made on 1 April 2011.
PKN ORLEN hedged purchase price of crude oil with futures contract. Through the settlement of the hedging transaction purchase price of crude oil will be reduced by ca. USD 121 m (i.e. PLN 341 m, based on the average USD/PLN exchange rate as of 31 March 2011, as stated by the National Bank of Poland). As a result of these operations the amount of ca. USD 300 m (i.e. PLN 847 m, based on the average USD/PLN exchange rate as of 31 March 2011, as stated by the National Bank of Poland) will be included in “inventories” position in unconsolidated financial statement of PKN ORLEN for the second quarter 2011.
Additionally within the period of the agreement of gathering and keeping of crude oil obligatory inventories LAMBOURN made payments to PKN ORLEN for guaranteeing of inventories storage.

All amounts presented in the announcement do not include VAT.

LAMBOURN is a SPV 100% controlled by Deutsche Bank Poland and according to the articles of association the company is entitled to turnover of crude oil.

PKN ORLEN is currently conducting a process of preparing a new agreement for sales and new agreement for gathering and keeping of a part of crude oil obligatory inventories.

See also: regulatory announcement no 56/2010 dated 30 March 2010.