Macroeconomic conditions led to a 12% decline in revenue year on year, while also pushing the cost of gas sold down 15%. Despite the challenging environment, operating profit of the Group rose PLN 60m compared with Q1 2015, with net profit up 11% to PLN 1.39bn.

Exploration & Production – sales volumes up in a low oil price environment

Exploration & Production reported revenue of PLN 1.05bn for Q1 2016, which is 14% less compared with the same period last year. EBITDA was PLN 619m, down 29% year on year.

An over 40% drop in oil prices took PLN 120m off revenue from sales of oil and condensate, despite a 15% rise in sales volumes (led mainly by a 47% increase in the sales volumes of oil and condensate produced from Norwegian assets).

Trade & Storage – selling prices and cost of gas down

For Q1 2016 Trade & Storage booked revenue of PLN 9.6bn, down 14% year on year. Operating profit was PLN 599m, having increased 3.5% year on year. Actively responding to the changing market environment, in 2015 PGNiG S.A. and PGNiG OD made several tariff reductions, with the average price of gas fuel reduced by a total of 11% year on year. Also, the companies offered attractive discounts to their major customers. As a result, operating margin on high-methane gas fell from 4% in Q1 2015 to 2% in Q1 2016.

Distribution – volumes of distributed gas up with operating expenses down

Operating profit in Distribution rose 76% year on year, to PLN 533m, on EBITDA of PLN 758m, up 45% on Q1 2015.

The strong result reflected a PLN 150m (15%) decrease in operating expenses, driven mainly by the Efficiency Improvement Programme. A 6% rise in revenue in Q1 2016 was achieved on higher gas fuel distribution volumes, which reached 3.49 bcm (7%) on lower year-on-year average temperatures recorded in the first months of 2016 and new grid connections.

Generation – performance supported by lower cost of coal and higher heat tariffs

The segment delivered EBITDA of PLN 362m, up 17% year on year. Q1 2016 operating profit also rose by 17%, or PLN 39m, on Q1 2015, to PLN 266m.

The marked improvement in the segment’s result was mainly driven by a 7% increase in the volumes of heat sold and higher heat tariffs. Also, the cost of coal was slightly down.

During the year, the Group is set to consistently pursue its strategy of investing in district heating as a market offering high growth potential.

PGNiG Group performance in Q1 2016 (PLNm)

	Q1 2015	Q1 2016	Change
Revenue	12,495	10,980	-12%
Operating expenses (excluding D&A)	(10,169)	(8,587)	-16%
EBITDA	2,326	2,393	3%
EBIT	1,662	1,721	4%
Net profit	1,244	1,386	11%