This improvement in the financial results of the PGNiG Group is primarily a result of an improvement in the profitability of sales of high-methane gas due to a fall in the unit costs of gas import purchases.  In Q3 of this year - for the first time in twelve months - the margin on sales of high-methane gas was positive.  It amounted to 11 per cent, as compared to minus 5 per cent during the equivalent period of last year.

Taken over the first nine months of the year the margin on high-methane gas amounted to minus 10 per cent, which is the main factor affecting the operating profit for the first three quarters of 2009, at minus PLN 85 million.

The financial results achieved by PGNiG Group in Q3 would have been better still if not for a reduction in the volume of gas sold, the weakening of the Polish zloty against the dollar, a reduction in the volume of gas distributed with a higher tariff for six gas companies, and a reduction in the profitability of sales of petroleum.

PGNiG Capital Group (PLN m)	Q3 2008	Q3 2009	change
revenues from sale	3,654	3,408	- 7%
EBIT	196	495	153%
EBITDA	532	842	58%
net result	180	408	127%

Growth in natural gas extraction

During Q3 2009, extraction of natural gas increased by 11 per cent to a level of 981 million cubic metres, as compared to 887 million cubic metres in Q3 2008.  This was due to a 25 per cent increase in the volume of nitrogen-rich gas from existing wells, made possible by an increase in the processing capacity of nitrogen rejection units.

Comparing the data from the first three quarters of this and last year, we can observe an increase in the amount of gas extracted, but on a smaller scale than in the third quarter itself - raw extraction for the first nine months of 2009 amounted to 3,037 million cubic metres, and was 1.2 per cent higher than in the period analysed for the previous year, when it amounted to 3,001 million cubic metres.

Analysing sales of natural gas in Q3 2009, there is an observable drop in sales of that raw material, of 13 per cent in comparison with the same period of the previous year.  That decrease amounted to 329 million cubic metres.  The causes of reduced demand for gas included the economic slowdown, as a result of which sales to industrial customers fell, with the largest decrease being to nitrogen plants (a fall of 25 per cent).  The average monthly temperature in September of this year was also significant - it was 2^oC higher than in September 2008, causing individual customers to use less gas for heating purposes (a fall of 13 per cent).

The reduced volume of gas taken by industrial and individual customers meant that in Q3 2009, PGNiG noted a decrease in revenues from sales of PLN 173 million, or five per cent in comparison with Q3 2008.  Total revenues from sales of gas for Q3 2009 amounted to almost PLN 3 billion.

Crude Oil

From the beginning of the year, extraction of crude oil reached 366 thousand tonnes, and was approximately two per cent higher than in the same period of the previous year.  However, in Q3 2009, crude oil extraction fell by seven per cent to a level of 98 thousand tonnes, in comparison with 106 thousand tonnes in Q3 2008.  This difference in the level of extractions between Q3 2009 and Q3 2008 results from a change in the maintenance shutdown period for the largest crude oil plant in Dębno.  In 2009 the shutdown took place in Q3, whereas in 2008 it took place in Q2.  The increasing crude oil extraction from the beginning of the year amounted to 366 thousand tonnes, and was almost two per cent higher than in the same period of the previous year.

Revenues from the sale of crude oil fell in Q3 2009 by 26 per cent to a level of PLN 136 million, as compared with PLN 183 million in Q3 2008.  This decrease was caused by a 42 per cent drop in the average market price of crude oil between Q3 2009 and Q3 2008.  The fall in revenues from crude oil sales was also caused by a four per cent reduction in the volume of crude oil sales, due to lower extraction.

PGNiG Group's investments accelerate

The results obtained in the third quarter provide a stable foundation for carrying out investment plans.  In accordance with assumptions, this year's total expenses for investment in the PGNiG Group will amount to PLN 5 billion.  Outlays by distribution companies on construction and modernisation of local gas networks will be approx. PLN 1 billion.  A further PLN 1 billion is designated for searching for new deposits, and the remaining PLN 3 billion for managing deposits, building and expanding underground gas storage depots and investments in the areas of gas trading, electricity and IT.

Thanks to these investments, by around the beginning of 2012 there will be a significant increase in the capacity of underground gas storage depots, from the current 1.6 billion cubic metres to 2.6 billion cubic metres.  Other investments are also gathering pace, including the construction of the Lubiatw-Międzychód-Grotów (LMG) crude oil and gas plants.  This investment is planned to be completed in 2012/2013, but everything indicates that it will be ready a year ahead of schedule, around the beginning of 2012.  Thanks to LMG, crude oil extraction will grow to 900,000 tonnes annually from the current 500,000 tonnes.  LMG will also enable us to extract an additional 200-250 million cubic metres of gas annually.

Joanna Zakrzewska

Press spokesperson, PGNiG SA