OREANDA-NEWS. LOTOS posted PLN 28.6bn in revenue in 2013, with operating profit at PLN 146m and net profit of just under PLN 40m. Upstream operations and efficient processing of crude oil into fuels will power the Company's value creation in 2014.

The programme, announced in spring last year, focuses principally on key investment projects and the Group's reorganisation. It is closely linked with the Group’s strategy, and was designed with the primary goal of driving growth and value creation.

LOTOS has been effective in managing its liquidity position. In 2013, we repaid another portion of the debt incurred to finance the 10+ Programme, bringing our net debt to equity ratio down by 7pp, to 62%.

Our full-year results were heavily affected by the overall macroeconomic climate, including record-low refining margins. This was compounded by the weakness of the domestic market due to decelerating GDP and the shadow economy, which together depressed our top-line performance.

New licences and first oil from Norway
In October 2013, LOTOS Norge, a LOTOS Petrobaltic subsidiary, entered into a series of agreements on purchase of interests in more than a dozen licences on the Norwegian Continental Shelf, referred to as the Heimdal assets. This was the key step towards recovery of funds tied up in the Yme project and also had the effect of doubling production. The Norwegian annual production output attributable to interests held by LOTOS is approximately 240 thousand toe, or 5 thousand boe/d. To compare, throughout the whole of 2013 LOTOS produced some 219.4 thousand tonnes of crude oil (4.4 thousand bbl/d).

Following the December 2013 drilling of an exploration well in the Trell prospect in the PL 102F licence area, the presence of crude oil was confirmed in February 2014. This marked the first time oil had been discovered in a Polish-held Norwegian licence area.

Efficient refinery and new plans
In the refining segment, we are working on a petrochemical project with Grupa Azoty, which is key to LOTOS growth. To fully leverage the benefits of the successful implementation of the 10+ Programme, LOTOS has also been busy with preparations to build a delayed coker unit (DCU) at its Gdansk refinery, which will directly enhance processing efficiency and help phase out the production of unprofitable heavy fuel oil. Instead, the annual output of motor fuels and coking coal will rise by as much as 900,000 tonnes and approximately 350,000 tonnes, respectively.

Another major success in 2013 was the increase in the conversion ratio at the MHC hydrocracking unit, built as part of the 10+ Programme. The 90% conversion ratio achieved in August 2013 marks enormous progress on the originally designed nameplate ratio of 60%. Assuming the unit works at its average processing capacity of 160 tonnes of feedstock per hour, improving MHC conversion by as little as 5% will raise the output of quality fuels ? chiefly diesel oil - by approximately 70 thousand tonnes.

Energy efficiency is another important aspect of the refinery’s operations. After replacing the 35 year-old gasoline and oil units with three state-of-the-art process furnaces, the Gda?sk refinery reduced its energy consumption and emissions, while also improving production capacity and safety. In this way, the refinery – which already boasts the title of the most energy-efficient refinery in Central and Southern Europe according to Solomon Associates – became even more efficient.

Fastest-growing service station chain in Poland
In 2013, LOTOS maintained its leading position as Poland’s fastest growing network of service stations. Apart from opening a large number of new stations (57), in 2013 the Group also focused on developing sales of fuel and non-fuel products. Consequently, LOTOS improved its retail market position and by the end of 2013 had secured a market share of 8.5%, compared with 8% in 2012. Our 2015 goal is to reach 10% on the domestic fuel retail market.

According to the Polish Organisation of Oil Industry and Trade, the Group’s share in the domestic fuel market was 33.3% in 2013. The growing shadow economy in fuel trading and the economic slowdown reduced official diesel oil consumption by 6% in 2013. In contrast, the Group’s share in the domestic diesel oil retail market rose from 9.5% to 10.0% year on year.