Performance in Q3 2016

Net profit of the PGNiG Group came in at PLN 1.63bn, down 25% year on year. The Group's EBITDA was 20% lower year on year, having fallen from PLN 5.31bn to PLN 4.27bn, with sales revenue down by 14% in Q3 2016.

In the Trade and Storage segment, the Group's YTD EBITDA was PLN 761m, relatively unchanged year on year (Q1–Q3 2015: PLN 758m). Operating expenses decreased mainly on lower market prices of hydrocarbons and lower costs of imported gas. In view of the growing deregulation of the gas market in Poland, over the last year the gas sale tariffs of PGNiG Obrót Detaliczny and PGNiG SA have been reduced a number of times. The Group's new offering has proved more attractive, as demonstrated by the 0.5bcm growth of the volume of gas sales.

The Distribution segment's operating profit increased 11% year on year, to PLN 1.28bn, while its EBITDA came in at PLN 1.97bn, up 8% on the year earlier, mainly due to a PLN 75 mln (2%) increase in revenue driven by a 7% increase in the volume of distributed gas. On the other hand, the segment's expenses were down by PLN 51m (or 2%) year on year, following the workforce streamlining programme carried out in 2015.

Operating profit of the Generation segment for Q1−Q3 2016 was PLN 301m, up PLN 119m year on year. The segment's EBITDA was PLN 560m, an improvement of 34% on the year earlier. The key contributing factors included consolidation of newly acquired companies, higher revenues on increased volumes of heat sales and a higher heat tariff, as well as lower costs of coal, the main fuel used to produce heat.

In the first nine months of 2016, the Exploration and Production segment experienced macroeconomic headwinds. During the period, the average price of Brent crude in złoty terms fell 20%; EBIT for Q1-Q3 2016 was PLN 179m, and EBITDA came in at PLN 990m, significantly less than a year earlier (down respectively by 86% and 57%). Low prices of crude oil were behind a 17% decline in the segment's revenue. Furthermore, in Q2 2016 impairment losses on non-current assets reduced the segment's profits by PLN 692m; in 2015, the impairment losses were PLN 136m.

Summary of the PGNiG Group's performance in the first ten months of 2016

New contracts for sale of natural gas in Poland and abroad

In 2016, we restored an upward trend in gas sales to medium-sized companies (from the average monthly net volume loss of 110m m³ in 2015 to the average monthly net volume increase of 11m m³ in 2016), which attests to the attractiveness of PGNiG Obrót Detaliczny's offering and the effective change of approach to customers.

In 2016, the PGNiG Group has executed a number of large gas sales contracts in Poland, including with Grupa Azoty, PKN Orlen, PGE, Ceramika Paradyż, EDF Toruń, Lajkonik Snacks, Grana, and Bahlsen Polska, which demonstrates the competitiveness and security of gas supplies from PGNiG.

We also launched gas exports to Ukraine, expanding our portfolio of cross-border customers in the neighbouring markets.

In September 2016, PGNiG Obrót Detaliczny launched its retail dual-fuel offering (Pakiet Prąd i Gaz – PiG), and acquired several thousand electricity customers in just two months. The company also prepared a special offer for the Warsaw Uprising 1944 veterans – an annual subsidy of up to PLN 900 to their gas bills.

In 2016, PGNiG Supply&Trading, which operates in the German market, has acquired 40 thousand new retail customers and increased its sales volume by more than 280m m³ (or 17%).

Strengthening of the heat generation business and expansion of the distribution network

The PGNiG Group's strategy of strengthening its heat generation business is pursued through capacity additions. In April 2016, PGNiG TERMIKA purchased 100% of shares in Przedsiębiorstwo Energetyki Cieplnej S.A. of Jastrzębie Zdrój. Then in August 2016, PGNiG TERMIKA purchased shares in Spółka Energetyczna Jastrzębie S.A. from Jastrzębska Spółka Węglowa S.A.

There is also a consistently implemented strategy to acquire new gas customers and extend the service to yet unserved regions on Poland's gas distribution map. In line with its new strategy, Polska Spółka Gazownictwa plans to roll out its gas network into 74 communes and municipalities and connect approximately 350 thousand new customers by 2022.

LNG deliveries and the Northern Gateway

To date, under its contract with Qatargas, Polskie Górnictwo Naftowe i Gazownictwo S.A. has received six regular LNG shipments at the Lech Kaczyński LNG Terminal in Świnoujście. In June 2016, PGNiG also received the first LNG cargo under a spot contract with Statoil.

On June 28th 2016, PGNiG decided to open an LNG trading office in London in early 2017.

The Company, supported by the Polish government, is in talks on possible supplies of gas from the Norwegian Continental Shelf via the planned gas pipeline link between Norway/Denmark and Poland. Gas pipeline operators are expected to commence the Open Season procedure and reserve capacities on this connection in Q1 2017.

PGNiG currently holds 18 licences on the Norwegian Continental Shelf through its subsidiary, PGNiG Upstream International. In 2016, the subsidiary secured four new licences.

Exploration and Production − work performed in Pakistan, a research project in Gilowice

In May 2016, the Company began to drill a third well on the Rehman field in Pakistan, primarily to increase production of natural gas. In November 2016, PGNiG also signed a letter of intent with National Iranian Oil Company on cooperation in oil field development, whereby PGNiG is to carry out an analysis of geological and formation data of the Soumar field.

The experience and know-how in the application of advanced fracturing techniques gained during work on shale gas formations are now being used by PGNiG in its efforts to extract coal bed methane in Gilowice.

Press conference November 9th 2016 PDF