In Q1 2012, the PGNiG Group reported a 27% year-on-year rise in revenue, up to almost PLN 9bn. The increase was principally driven by record-high gas sales volumes and the first-time consolidation of PGNiG Termika (former Vattenfall Heat Poland), whose acquisition was completed in January 2012.

Trade and Storage segment loses PLN 778m due to lack of new tariff approval

Higher crude oil prices and appreciation of the US dollar aganist the złoty from July 2011 led to an increase in costs of gas purchases by the Company, which was not reflected in the gas fuel tariff. The situation resulted in a negative margin on sales of gas, and consequently in a PLN 1bn drop in the operating result of the Trade and Storage segment  on Q1 2011.

The Trade and Storage segment's loss of PLN 778m had the strongest adverse effect on the Group's operating result, bringing EBIT down by over PLN 1bn on Q1 2011. This negative impact was only partially offset by the first-time consolidation of the Generation segment (generation and sale of heat and electricity), which contributed PLN 126m; and a growing EBIT of the Exploration and Production segment (up by 14% or PLN 53m), improved on the back of higher crude oil prices.

Consolidation of PGNiG Termika

PGNiG Termika, a company producing and selling heat and electricity, has been fully consolidated since Q1 2012. The fact that in this period the revenue from sales of heat alone exceeded the revenue from sales of crude oil attests to the company's significance to the PGNiG Group.

The volume of heat sales in Q1 2012 was 17.7 PJ, up by 2% on Q1 2011, primarily on the back of lower temperatures in February. Revenue from heat sales grew by 8%, to PLN 376m, driven also by an increase in the heat tariff affective as of July 2011.

Electricity sales volumes remained close to the level reported for Q1 2011, at 1.4 TWh. Given the higher average prices of electricity and red certificates, accompanied by higher volumes of green certificates, the revenue from electricity sales rose by 13%, to PLN 370m. Electricity was sold at the average price of PLN 203.5/MWh, up by PLN 10.8 on Q1 2011.

Exploration and Production segment delivers strong performance

Once again, the Exploration and Production segment recorded a two-digit increase in revenue from exploration services.  In Q1 2012, revenue from the services provided by the segment went up by 16% year on year, to PLN 238m, 

though the growth has visibly decelerated.  Revenue from drilling services grew faster (up by 22%), to PLN 129m, which followed primarily from stronger domestic demand and a growing interest in shale gas exploration in connection with outstanding licence commitments.

PGNiG Group's performance in Q1 2012 (PLNm)

Record-high demand for natural gas

In the first quarter of 2012, the production of natural gas was 1.1bn m³, an output comparable to that seen in the first quarter of 2011. In the first three months of 2012, the volume of gas sales came in at an all-time high of PLN 5.1bn m³, up by 6.6% on Q1 2011. High consumption of natural gas by households (1.7bn m³) was due to low temperatures - February 2012 has been the coldest month since 2005. A substantial increase in natural gas demand was also seen among nitrogen processing plants (up by 12%) and other industrial customers (up by 10%).

Revenue from gas sales was PLN 7.4bn, up by 16% on Q1 2011. However, the cost of gas sold increased by as much as 42%, which led to a major decline in the margin on sales of high-methane gas and resulted in a significant loss of PLN 778m in the Trade and Storage segment.

Diversification of gas supplies - optimisation of gas import costs

The consistent policy of diversifying gas supply sources and developing storage capacities brought fruit in Q1 2012. Despite the record-high demand for gas, import volumes fell compared with Q1 2011 by more than 4%, to 3bn m³. The structure of import purchases changed as well. Thanks to the use of the expanded capacities of the Lasów interconnector, the virtual reverse flow at the Yamal pipeline, and the Moravia interconnector, 860m m³ of gas was sourced from Gemany and the Czech Republic, which is more than three times the amount reported in Q1 2011, when such imports amounted to 275m m3. At the same time, imports from Russia fell from 2.8bn to 2.1bn m³.

As the underground gas storage facilities were expanded and, during the summer season, filled to capacity, gas stocks reached 1.8bn m³ at the end of September and 1.5bn m³ at the end of December 2011. Consequently, in Q1 2012, during peak demand, as much as 900m m³ of gas was withdrawn from the storage facilities.

High prices drive revenue on crude sales

Crude oil production has been stable - the slight year-on-year decline of the output could be attributed to the natural decrease in flows from the producing fields. In the first quarter of 2012, the production of crude oil and condensate was 128 thousand tonnes, down by 4% year on year. Therefore, the sales volume decreased by 2%, to 127 thousand tonnes.

In mid-2012, new wells are to go onstream at the Barnówko-Mostno-Buszewo field (currently PGNiG's largest field), and the launch of production from the LMG field is scheduled for 2013. Domestic crude oil production in 2012 is forecast at 480 thousand tonnes, to rise to 750 thousand tonnes in 2013.

Revenue from crude sales increased fuelled by growing oil prices. In Q1 2012, the average price of Brent crude was USD 119, up 12% year on year. In złoty terms, the crude price per tonne rose by 29% over the year. In Q1 2012, the nine-month average price of crude oil reached 113 USD/boe, up 40% on Q1 2011, and the USD/PLN exchange rate was over PLN 3.2. The average USD/PLN exchange rate in Q1 2012 was nearly 12% higher than in Q1 2011 (PLN 2.88). Taking into account the average USD/PLN exchange rate, the value of the nine-month average price of petroleum products in Q1 2012 was  364 PLN/boe , up by  57% year on year and down by 1% quarter on quarter.

Joanna Zakrzewska

Press Officer