The financial results of the company will not affect its investment activities. PGNiG has been and will be consistent in carrying out investments contributing to the national energy security and the company’s worth.
Sales of natural gas – subsidised operations
The core business of the company, i.e. sales of natural gas, has been the key factor affecting its financial results. The loss on natural gas sales in first quarter of 2009 resulted from the very high gas import costs, which were not reflected by the gas sales tariff then in force. The adjustments to the PGNiG’s Tariff approved by the head of the energy regulatory office, which came into force on November 1, 2008 (the company had requested the Tariff change starting from October 1, 2008) involved only a 11% % increase to gaseous fuel prices, whereas the company requested a 23% increase.
The cost per unit of gas imports increased by as much as 108% compared to first quarter of 2008.
The gas purchase prices paid by PGNiG in first quarter of 2009 were based on oil product prices from the last three quarters of 2008. The nine-month average oil price for first quarter of 2009 was 98 $/boe, falling by 9% compared to the average for fourth quarter of 2008. Accounting for the PLN/USD exchange rate, the nine-month average price denominated in the Polish currency increased by 6 % in first quarter of 2009 compared to fourth quarter of 2008, which means that during the discussed period, PGNiG was paying more for an unit of imported gas than in fourth quarter of 2008.
In practice, this means that also in first quarter of 2009, each 1000 m3 of imported natural gas sold on the domestic market, whether to industrial or individual customers, was subsidised by revenues on other operations of PGNiG Group, such as oil sales or exploration and geological operations.
Profit on exploration, geological and geophysical operations
The depreciation of the Polish currency affected the good results of our geological and geophysical companies, which generated around PLN85 million of revenue, which means a 22 % increase compared to the similar period of the 2008. The revenues generated by exploration companies amounted to nearly PLN 110 million, which means a 5% increase compared to first quarter of 2008. In first quarter of 2009, the PGNiG Group companies signed new contracts with external entities for works in Slovakia and India, as well as an intragroup contract with PGNiG Libya, for seismic works on a license block owned by PGNiG.
On the other hand, the 54 % decrease in mid-term oil prices on the world markets between first quarter of 2008 and first quarter of 2009 resulted in a PLN 93 million decrease in oil sales revenues, to the level of PLN 145 million during the discussed quarter. The result was nearly identical to that achieved in fourth quarter of 2008 and 40 % lower than the result for first quarter of 2008. As a result, EBIT of the upstream segment for first quarter of 2009 was PLN 272 million, which is 27 % lower than for first quarter of 2008.
Success in financial risk management
PGNiG is significantly exposed to the exchange rate risk and interest rate risk resulting from the nature of the contracts which it signs in the course of its core business and financial operations. The lack of possibility to naturally balance the entire worth of foreign currency liabilities against foreign currency receivables results in a significant exposure to the exchange rate risk. The financial risk management policy which has been consistently implemented by PGNiG has shielded the company from the negative impact of the financial market crisis. In first quarter of 2009, the results on the settlement of derivatives at the average rate of exchange at the National Bank of Poland, accounting for the paid option premiums, was +PLN 217 million.
