LOTOS Posts Higher Revenue Despite Weaker Demand for Fuels
OREANDA-NEWS. Despite difficult macroeconomic conditions in Q2 2014, LOTOS posted close to PLN 7.2bn in revenue, up by 18% year on year. In H1 2014, the Company's revenue rose 8% year on year, to over PLN 14.3bn.
As in Q1 2014, the financial results were under continued pressure from deteriorating crack margins on key products (particularly diesel oil, aviation fuel and light fuel oil) and a decline in the model refining margin, which was driven down to USD 4.97/bbl (-1.6% quarter on quarter and -18.3% year on year) in the period under review.
However, it should be stressed that, having completed the 10+ Programme, LOTOS now has one of the world's most advanced refineries, which gives it a substantial competitive advantage. According to a benchmark report published by Total (European Refining Margin Indicator), the average margin for refineries located in north-western Europe was a mere USD 1.48/bbl in Q2 2014.
Net profit/loss for Q2 2014, of PLN -122.5m, was further affected by the impairment loss recognised on investment in the YME field development project. The estimated effect of the impairment on net profit/loss for H1 2014 was PLN 191m.
The Extraordinary General Meeting of Grupa LOTOS S.A., to be held on September 8th 2014, will decide whether to approve increasing the Company's share capital by issuing new shares, which would be offered to the Company's existing shareholders. LOTOS expects to raise approximately PLN 1bn through the issue. The proceeds will be used to finance the Company's strategy, which envisages further investments to increase the refinery's complexity and step up hydrocarbon production.
How much money is obtained from the issue will depend on the macroeconomic climate, capital market conditions, demand for the shares, and final terms and conditions of the offering.
In connection with the proposed share capital increase, Grupa LOTOS S.A. will offer PLN 55m new ordinary shares to its existing shareholders holding pre-emptive rights to acquire the shares. The proposed record date for the pre-emptive rights is November 18th 2014.
The upstream segment's revenue for Q2 2014 totalled PLN 240m, up by approximately 94% year on year, mainly on the back of production and sales of condensate and gas from the Heimdal assets acquired in 2013, as well as increased sales of Rozewie crude. In H1 2014, LOTOS sold a total of 1,965 thousand boe (97% more than in H1 2013), including 884.5 thousand boe from Norwegian deposits, 747.5 thousand boe from Poland and 333 thousand boe from Lithuanian fields.
Baltic Sea production in Q2 2014. LOTOS Petrobaltic continued to produce crude oil and natural gas from the B3 field. On May 23rd 2014, the Ministry of Environment amended licence No. 108/94, allowing crude oil and natural gas production from the B3 field to continue for 32 years from the licence issue date, i.e. until July 29th 2026.
Lithuanian companies AB LOTOS Geonafta and UAB Genciu Nafta maintained stable production of crude oil from the Girkaliai, Kretinga, Nausodis and Genciu on-shore fields, and UAB Manifoldas - from the Auksoras, Liziai and Veziaciai fields.
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