PGNiG Group’s net profit in H1 2015 up 23% year on year

WARSAW, 17-8-2015 — /EuropaWire/ — Despite declining oil prices, the PGNiG Group earned a net profit of nearly PLN 1.9bn in H1 2015, up 23% year on year. Such strong performance was attributable chiefly to the consistent pursuit of the Efficiency Improvement Programme in all Group companies.

The Group’s savings generated by the end of H1 2015 represented 87% of the full-year target. The PLN 437m permanent reduction in costs is a part of the Company’s ongoing effort to restructure the Group. “Faced with the deregulation of the Polish gas market, PGNiG S.A. must take a number of steps to adapt its Group to a more competitive market. We can achieve this goal through such measures as the Efficiency Improvement Programme, which is a part of the Company’s strategy for 2014-2022,” said Mariusz Zawisza, President of the PGNiG Management Board and the Company’s CEO.

During the first half of the year, the Group reported revenue of over PLN 20bn, up 24% from PLN 16.4bn in H1 2014. The increase was driven by larger volumes of gas sold following the introduction of the exchange sale requirement. In H1 2015, the Group sold over 4.5 bcm of gas on the Polish Power Exchange, compared with 0.24 bcm a year earlier.

The Group’s EBITDA grew by 15%, to approximately PLN 3.99bn, from PLN 3.5bn in the same period of 2014. With a 39% share, the Exploration and Production segment was the largest contributor.

As in 2014, in H1 2015 the results were affected by one-off events, including in particular recognition of impairment losses on production and exploration assets and write-off of dry wells, which reduced operating profit by PLN 204m.

Effect of lower crude oil prices on the Exploration and Production segment

Revenue of the Exploration and Production segment in Q2 2015 came in at PLN 1.3bn, a year-on-year decrease of 27%, with the segment’s EBITDA reported at PLN 663m, down 19% on the same period last year.

The segment’s performance was affected by lower revenue from sales of crude oil, which declined by PLN 300m year on year, with prices down by over 30% in złoty terms and sales volumes unchanged. Another material factor was a PLN 96m decrease in revenue from geophysical and drilling services, to PLN 99m.

Negative gas margin The Trade and Storage segment’s performance in Q2 2015 was affected by a 29% rise in revenue from gas sales, to PLN 6.2bn, with shifts seen in the sales structure and prices (exchange sale requirement). The segment’s revenue was up 24%, to PLN 6.6bn.

In Q2 2015, the Group’s gas sales volumes increased to 4.8 bcm, from 3.3 bcm in Q2 2014. By customer groups, the largest volume growth was seen on the PPE and followed from the exchange sale requirement. Larger volumes of gas were sold also to customers of PGNiG Sales & Trading, and to power and heating plants.

In Q2 2015, the volume of gas imported by PGNiG S.A. was down 4% on Q2 2014, totalling 2.5 bcm, with imports from markets east of Poland down 0.3 bcm and imports from the west and south up 0.2 bcm.

PGNiG Group’s performance in H1 2015 (PLNm)

PGNiG Group’s performance in Q2 2015 (PLNm)

Effect of lower air temperatures on the Distribution segment

In Q2 2015, the Distribution segment’s revenue was up 12% year on year, to over PLN 1bn.  The volume of distributed gas increased by 7.5%, to 2 bcm, as the average air temperatures were 0.3°C lower year on year, with the average air temperature in April down by as much as 1.4°C.

Improved performance of the Generation segment on lower fuel costs

The Generation segment’s EBITDA in Q2 2015 was PLN 102m, up 42% year on year, chiefly on the back of lower cost of fuels used to generate heat and electricity, even despite higher generation volumes. Sales of electricity from the Group’s own generation sources fell 4%, to 674 GWh in Q2 2015, while sales of heat energy were at 5.8 PJ, up by 9%.

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On June 22nd 2015, the Company shares closed at an all-time high of PLN 6.95. On August 4th 2015, PGNiG S.A. paid a record-breaking dividend of PLN 0.20 per share, with the distributed amount totalling PLN 1.18bn. In addition, in H1 2015 the Company’s net debt came down to its record low.

The first half of the year was also a period of consistent implementation of the Group’s strategy adopted in December 2014. The Group managed to introduce or launch:

• discount schemes for strategic (PGNiG S.A.) and retail (PGNiG OD) customers, which marks the Group’s departure from its former monopolistic approach towards a more customer-centric attitude;
• the Efficiency Improvement Programme, which generated savings of over PLN 430m by the end of H1 2015;
• the process of selecting foreign upstream assets for acquisition by the Group;
  the process of selecting heat producing assets for acquisition by the Group;
• discussions on renegotiation of price terms of the long-term contract with Gazprom Eksport, with Gazprom called to arbitration;
• new process and organisational models for the Group’s R&D activities.

In H1 2015, the Exploration and Production segment drilled 27 wells, including 16 exploratory/appraisal wells and 11 production wells. Tests of six exploratory and appraisal gas wells produced positive results, with total recoverable reserves estimated at approximately 3.5 bcm of natural gas (22.6 mboe).

MEDIA CONTACT

Dorota Gajewska
Director of the Department of Communication – Spokesman
tel.: +48 22 589 45 92 (sekretariat)
mobile: +48 669 660 763
e-mail: rzecznik@pgnig.pl