The financial results of the company will not affect its investment activities. PGNiG has been and will be consistent in carrying out investments contributing to the national energy security and the company’s worth.

Sales of natural gas – subsidised operations
The core business of the company, i.e. sales of natural gas, has been the key factor affecting its financial results. The loss on natural gas sales in Q1 2009 resulted from the very high gas import costs, which were not reflected by the gas sales tariff then in force. The adjustments to the PGNiG’s Tariff approved by the Head of the Energy Regulatory Office, which came into force on 1 November 2008 (the Company had requested the Tariff change starting from 1 October 2008) involved only a 11% percent increase to gaseous fuel prices, whereas the Company requested a 23 percent increase. The cost per unit of gas imports increased by as much as 108 percent compared to Q1 2008.
The gas purchase prices paid by PGNiG in Q1 2009 were based on oil product prices from the last three quarters of 2008. The nine-month average oil price for Q1 2009 was 98 USD/boe, falling by 9% compared to the average for Q4 2008. Accounting for the PLN/USD exchange rate, the nine-month average price denominated in the Polish currency increased by 6 percent in Q1 2009 compared to Q4 2008, which means that during the discussed period, PGNiG was paying more for an unit of imported gas than in Q4 2008.
In practice, this means that also in Q1 2009, each 1000 m3 of imported natural gas sold on the domestic market, whether to industrial or individual customers, was subsidised by revenues on other operations of PGNiG Group, such as oil sales or exploration and geological operations.

Profit on exploration, geological and geophysical operations
The depreciation of the Polish currency affected the good results of our geological and geophysical companies, which generated approx. PLN 85m of revenue, which means a 22 percent increase compared to the similar period of the last year. The revenues generated by exploration companies amounted to nearly PLN 110m, which means a 5 percent increase compared to Q1 2008. In Q1 2009, the PGNiG Group companies signed new contracts with external entities for works in Slovakia and India, as well as an intragroup contract with PGNiG Libya, for seismic works on a licence block owned by PGNiG.
On the other hand, the 54 percent decrease in mid-term oil prices on the world markets between Q1 2008 and Q1 2009 resulted in a PLN 93m decrease in oil sales revenues, to the level of PLN 145m during the discussed quarter. The result was nearly identical to that achieved in Q4 2008 and 40 percent lower than the result for Q1 2008. As a result, EBIT of the Upstream segment for Q1 2009 was PLN 272m, which is 27 percent lower than for Q1 2008.

Success in financial risk management
PGNiG is significantly exposed to the exchange rate risk and interest rate risk resulting from the nature of the contracts which it signs in the course of its core business and financial operations. The lack of possibility to naturally balance the entire worth of foreign currency liabilities against foreign currency receivables results in a significant exposure to the exchange rate risk. The financial risk management policy which has been consistently implemented by PGNiG has shielded the company from the negative impact of the financial market crisis. In Q1 2009, the results on the settlement of derivatives at the average rate of exchange at the National Bank of Poland, accounting for the paid option premiums, was +PLN 217m.

Projects contributing to the company’s worth
PGNiG has been consistent in carrying out investments contributing to the company’s worth and to the national energy security.
- in Q1 2009, expansion works began on the largest underground natural gas storage facility in Wierzchowice;
- construction works on Lubiatów-Międzychód-Grotów gas and oil production facility are underway; 
- in Q1, first drillings in the southern part of our license block in Pakistan were made; 
- in the Norwegian Continental Shelf, PGNiG Norway acquired participating interests in further exploration licences: PL350 and PL419, and was granted a consent to acquire another licence: PL521;
- in February 2009, Geofizyka Kraków started 3D and 2 D field seismic works on the Murzug licence block in Libya.

Results for Q1 2009   

	Q1 2009	Q1 2008	Change
Sales	6 379	5 330	20%
EBIT	(457)	947	(148%)
Net result	(399)	779	(151%)

Numbers in brackets mean a negative result

Joanna Zakrzewska
Spokesperson for PGNiG SA