A conference on Orlen’s performance in the second quarter of the year was held at the premises of the Warsaw Stock Exchange. The company recorded growth in all sales segments. The concern achieved a record-breaking LIFO-based EBITDA at PLN 3.1 billion, an increase by PLN 0.5 billion year on year.
According to Mirosław Kochalski, Vice President of the PKN ORLEN Management Board, the exceptional performance results from growth in sales, improvement of the macroeconomic climate, positive impact of regulations that thwarted the grey market in Poland and an increase in retail margins. Within this period an increase in consumption of oil has been reported. The growth on the Polish market was 26% year on year. The model downstream margin grew by USD 1.4/bbl year on year in the second quarter, while petroleum price went up by USD 4 (yoy). At the same time the oil price dropped by the same amount in comparison to the first quarter of the current year.
Orlen is strengthening its position in the power sector
In June the company opened a modern CCGT installation in Włocławek. The power plant is already producing electricity and heat for, among others, ANWIL and heat for the entire industrial complex in Włocławek. The remaining power is transmitted to the electrical grid. The works on another unit in Płock are underway and according to the company will be completed on schedule. In the second quarter the installation was connected to a 400kV line for the first time. „Currently we are conducting tests of the electricity generation system of the unit, which we are planning to open at the end of the year,” ensured Dariusz Grębosz, Head of Investor Relations.
Downstream and chemical production performance
The second quarter of the year saw an increase in the LIFO-based EBITDA by PLN 259 m year on year to PLN 2.55 bn. At the time the throughput increased by 10%. „This is mostly caused by the fact that the FCC unit and the Steam Cracker at Unipetrol came back into operation after an emergency shutdown in the last quarter of the previous year, as well as by a 10% increase in total sales volumes, including 11% in oil, 4% in gasoline, 8% in olefins, 122% in polyolefins, and 12% in fertilizers,” Grębocz said.
Additionally, the company received damages in the amount of PLN 450 m and PLN 50 m for the breakdown and resulting stoppage of the Steam Cracker and FCC unit at Unipetrol in the Czech Republic.
Exploration and production
In the second quarter of 2017 the average production increased by 17% yoy, which translated into LIFO-based EBITDA growing by PLN 82 m. This result was achieved at a time when Canada’s average output went up by 2.3 thousand boe/d and Poland’s average production declined by 0.1 thousand boe/d.
In Poland, Orlen continues exploration and production in the areas where it has permits.
„Work on the Polish assets included seismic data acquisition and analysis, and the drilling of an exploration well in the Płotki area, where production tests have confirmed the presence of gas qualifying for commercial extraction,” Grębosz said. The commercial exploitation should start not later than at the beginning of next year. Orlen’s partner in this endeavor is PGNiG.
Whereas in Canada fracking was conducted in three wells, while four were put into operation. Works regarding the construction of hydrocarbon transmission infrastructure are continued.
Orlen in Lithuania
The company stressed that its performance in Lithuania was improving. The settlement between Orlen Lietuva and the Lithuanian Railways on shipping tariffs may have a positive impact on the firm’s results.
Lower sales volumes in the current quarter resulted from limiting the sales of products shipped via maritime transport and increasing onshore sales volumes. The increase of profit on sales reflects the growth of products’ listing in result of higher oil prices. Higher petroleum throughput and increase of usage of refinery capacity by 10% mostly resulted from shorter overhaul stoppages.
Mirosław Kochalski, Vice President of the PKN ORLEN Management Board, also stressed that there were no plans to shut down Orlen Lietuva. He pointed that the economic environment was crucial and that the situation in Lithuania was improving. During the press conference he also reminded about the agreement signed between Orlen Lietuva and the Lithuanian Railways on shipping tariffs.
„The settlement of the dispute on shipping tariffs in Lithuania is a big success, which will impact our performance in Lithuania. Considering the current indicators and the situation in Lithuania we are not planning to sell PKN Orlen’s assets in Lithuania. We also signed an agreement with the Lithuanian Railways, which gives us a chance to improve the efficiency of Orlen Lietuva,” Kochalski said.
„We want to do everything to fully utilize the potential of the Mažeikiai refinery. We will not take any radical steps. We are still working on maintenance and efficiency,” Kochalski added.
The revenue in the second quarter of the year amounted to USD 954 m, last year at the same time it was PLN 882 m.
EBITDA LIFO was lower by USD 14 m year on year mostly because of the negative impact of write-offs resulting from overestimation of reserves in relation to obtainable prices at the level of USD 32 m with a positive impact of macro parameters and changes in the sales structure that result from the maximization of onshore sales.
Sales revenue in the first half of the year reached USD 1.9 bn. This is an increase in comparison to last year by 27%. The company’s pre-tax earnings between January and June equalled USD 108 m. It was lower by 25% in comparison to the first half of 2016.
In the first half of the year, Orlen Lietuva processed 4462 m tons o oil, which is an increase by 1% yoy. This year the company has used 87% of the Mažeikiai refinery’s existing capacity. It is a similar result to 2016.
Orlen in the Czech Republic
Unipetrol, Orlen’s Czech company, increased its sales by 32% year on year. This mostly pertains to petrochemical products. The increased sales profit from products reflect the increase of sales volumes and listing of refinery and petrochemical products caused by the hike in oil prices. Whereas the gross income grew by 52% year on year to reach CK 31 bn. Unipetrol also increased its usage of refinery capacity by 50% year on year. This was possible thanks to the fact that the Steam Cracker came back. In the second quarter of the year, EBITDA LIFO was at USD 6.5 m, which is an increase by 43%.
This resulted from higher sales volumes and positive impact of macroeconomic parameters and negative impact of write-offs resulting from overestimation of reserves in relation to obtainable prices.