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3.1. Revenue

Accounting policies

Revenue

The Group’s revenue comes primarily from trade in high-methane and nitrogen-rich natural gas, generation and sale of electricity and heat, as well as sale of produced crude oil.

The Group’s business includes services, such as distribution of gas fuels, storage of gas fuels, geophysical and geological services, gas service connection, drilling and oilfield services, real estate rental and other services.

The Group also generates revenue from construction contracts.

Revenue is measured at fair value of the consideration received or receivable, less any discounts, sales taxes (VAT, excise duty) and other charges.

Material estimates

Estimating natural gas sales

In order to correctly recognise revenue from gas sales in appropriate reporting periods, at the end of each reporting period the Group estimates the quantity and value of gas delivered to retail customers but not invoiced.

The value of natural gas supplied to retail customers but not invoiced is estimated on the basis of the customers’ historical consumption patterns in comparable reporting periods. The value of estimated gas sales is calculated as the product of quantities assigned to the individual tariff groups and the rates defined in the applicable tariff. There is a risk that the actual final volume of gas fuel sold might differ from the estimate. Accordingly, profit or loss for a given period may account for a portion of the estimated sales volume which will never be realised.

At the end of 2016, an estimated amount of PLN 103m was included in gas sales revenue (adjustment increasing the invoiced revenue), while gas sales revenue for 2015 was reduced by PLN 183m relative to the invoiced amounts.

Revenue from sale of crude oil

With regard to sales of crude oil produced from the Norwegian Continental Shelf, where the Group holds interests in licences together with other entities, the revenue from sale of crude oil is recognised based on crude volumes produced and sold to customers. However, the volume of crude oil sold to customers may differ from the volume of crude which is attributable to the Group in a given period based on its interest in a given licence. If the production volume attributable to the Group is higher than the sales volume, an asset (underlift) is recognised in the consolidated financial statements. Conversely, if in a given reporting period the volume of crude oil sold exceeds the production volume the Group is entitled to, a liability (overlift) is recognised in the consolidated financial statements.

At the end of 2015 and 2016 the volume of crude oil sold was lower than the Group’s share of production. Therefore, an asset of PLN 18.1m and PLN 7m, respectively, was recognised under receivables in the consolidated statement of financial position.

Revenue from construction contracts

If the outcome of a construction contract can be estimated reliably, revenue and costs should be recognised in proportion to the stage of completion of contract activity at the end of the reporting period. If the outcome cannot be estimated reliably, contract revenue should be recognised only to the extent that contract costs incurred are expected to be recoverable.

2016 2015
Domestic sales Export sales* Total Domestic sales Export sales* Total
Revenue from sale of gas, including: 24,323 2,106 26,429 28,262 2,001 30,263
High-methane gas 22,707 2,095 24,802 26,576 1,965 28,541
Nitrogen-rich gas 1,348 11 1,359 1,389 36 1,425
LNG 185 185 207 207
CNG 34 34 36 36
Propane-butane gas 49 49 54 54
Other revenue, including: 4,946 1,821 6,767 4,021 2,180 6,201
Crude oil and natural gasoline 646 875 1,521 703 1,174 1,877
NGL 86 86 68 68
Sales of heat 1,264 1,264 1,127 1,127
Sales of electricity 1,410 442 1,852 990 580 1,570
Revenue from rendering of services:
– drilling and oilfield services 45 167 212 53 214 267
– geophysical and geological services 50 167 217 53 62 115
– construction and assembly services 90 90 129 129
– distribution services 762 762 363 363
– connection charge 130 130 120 120
– other 208 11 219 248 4 252
Other 341 73 414 235 78 313
Total revenue 29,269 3,927 33,196 32,283 4,181 36,464

*By customer’s country.

The Group does not have any single external customer accounting for 10% or more of total revenue earned by the Group.

On foreign markets the Group sells its products mainly to customers in Germany (41.6% of export sales), Norway and Switzerland.

2016 2015
Value of non-current assets other than financial instruments located in Poland 29,734 29,854
Value of non-current assets other than financial instruments located abroad* 4,513 4,263
Total 34,247 34,117
% share of assets located outside of Poland in total assets 13.18% 12.50%
* Including PGNiG Upstream International AS (Norway). 3,929 3,646