Two other drivers of net profit in the period were the amended pricing formula for the Yamal Contract, and high gas distribution and heat sales volumes.

At the operating level, the Group reported significant growth of EBITDA, to PLN 1976m (compared to PLN 799m in Q1 2012), mainly on the back of improved results across all business segments.

Group revenue increased in Q1 2013, by 15% to PLN 10.3bn, with one of the contributing factors being higher sales volumes of oil (up 63%) and gas (up 7%). Despite the improved revenue, high-methane gas saw a negative sales margin of -3%.

"The Company has a well-defined short-term strategy, and is implementing it in a consistent manner. The key factor is the growth of hydrocarbon production from our own reserves. Our sound financial performance creates a stable platform for the delivery of our ambitious investment and exploration programmes, covering both conventional and unconventional deposits. And thanks to the increased production, our competitive edge will be enhanced and we will be better positioned to meet the challenges of the liberalised gas market," said Mirosław Szkałuba, acting President of the PGNiG SA Management Board.

Exploration and Production - the most profitable business segment

The Exploration and Production segment was the largest contributor to the Group's performance, with its EBITDA improving by 47% to PLN 912m in Q1 2013, compared to the PLN 618m posted in Q1 2012. This excellent performance was attributable to the recent start of production of oil and gas from the Skarv field in Norway, and the launch of the LMG oil and gas extraction facility, which is the largest of its kind in Poland. These two projects, of strategic importance to both PGNiG Group value growth as well as the energy security of Poland, together contributed to a rise of crude oil sales in the first quarter by 63%, to 207,000 tonnes. Combined with a 3% drop in the selling price of oil, this translated into a 49% higher crude oil revenue of PLN 508m. Oil production volume expanded by 79%, to 229,000 tonnes in Q1 2013.

"In terms of financial performance, this was yet another good quarter for the Company. Thanks to considerably higher oil production resulting from our two recently completed projects, we posted much better results. It is also important to note that all of our business segments reported improved performance at the end of the first quarter. With the stable crude price and steady foreign exchange rates, we were able to keep the Group's costs under control. The market then acknowledged PGNiG's robust financial standing with the appreciation of our stock's trading price,"  Jacek Murawski, PGNiG SA's CFO pointed out.

Better results posted by Trade and Storage

The 7% growth in gas sales volumes also triggered a significant improvement in the Trade and Storage segment's efficiency. In the first quarter of 2013, the segment's revenue rose by 15%, and its operating expenses, net of amortisation and depreciation expenses, by just 5% year on year. This allowed Trade and Storage to reduce its EBITDA loss by PLN 744m, to PLN -1m. The euro and US dollar exchange rates - affecting gas purchase costs - were down 2%, while the nine-month average of oil prices was PLN 345 per barrel, down 5%. Concurrently, the current gas fuel tariff did not allow us to fully cover the cost of acquiring the gas, which resulted in a -3% negative margin on high-methane gas sales and recognition of a PLN 36m impairment loss on high methane gas reserves.

In Q1 2013, gas sales volume reached nearly 5.38bn cubic metres, against 5.05bn cubic metres in Q1 2012. Gas sales benefited from favourable weather conditions and the growing number of PGNiG Sales and Trading's international customers - in the first quarter of 2013, PST sold 260m cubic metres of gas in Germany.

Improved gas sales volumes driving up the Distribution segment's performance

In the Distribution segment, EBITDA for the first quarter of 2013, typically the best quarter of the year, was PLN 815m, up 11% on Q1 2012. This strong performance was driven by an 8% increase in the volume of distributed gas, attributable to new connections, including customers purchasing coke gas, as well as higher gas consumption by households. This mainly followed from the low air temperatures in March 2013, which was the coldest March in ten years.

Sales of heat and electricity

In Q1 2013, sales of heat grew by 4.3%, to 18.5 PJ, while sales of electricity went up 7%, reaching 1.5 TWh. The growth in heat and electricity sales volumes was fuelled mainly by lower air temperatures. In Q1 2013, the Generation segment posted PLN 758m in revenue, and EBITDA of PLN 257m.

PGNiG Group's performance in Q1 2013 (PLNm)

Utilisation of gas storage capacities

As at the end of Q1 2013, gas inventory levels at PGNiG's storage facilities stood at 1.22bn cubic metres, compared with 670m cubic metres in the corresponding period of the previous year. This considerable difference is attributable to the fact that although PGNiG is required to maintain mandatory reserves of gas, it received no consent for their utilisation. Given the long winter, additional gas volumes then had to be purchased from Gazprom (on the basis of an annual order under the Yamal Contract) during peak demand in March 2013.

Joanna Zakrzewska

Press Officer