Detailed assumptions underlying the strategy in individual areas

unitAverage 2014–20172014
Financial KPIs
LIFO-based EBITDA PLNbn 5.1 5.2
LIFO-based EBITDA − Downstream PLNbn 3.9 4.2
LIFO-based EBITDA − Retail PLNbn 1.5 1.4
LIFO-based EBITDA − Upstream PLNbn 0.4 0.2
Financial leverage1 % < 30% 33%
Net debt/LIFO-based EBITDA x < 2 1.3
KPIs – Downstream
Share of Polish fuel market1 % 66 61
Refining capacity utilisation2 % 86 84
Olefins production capacity utilisation2 % 86 83
Crude processing at PKN ORLEN Group2 million tonnes 30.3 27.3
Fuel yield2 % 78.5 76.9
KPIs – Retail
Share of fuel sales in home markets1 % 17.0 14.4
Sales per service station1 million litres 3.8 3.8
Number of service stations x 2,688 2,692
KPIs − Upstream
Hydrocarbon production1 million boe per year 6.0 2.1
Hydrocarbon reserves1 million boe 54 50
Number of wells1 cumulatively 147 40
CAPEX
Total capex PLNbn 4.1 4.6
Downstream PLNbn 2.8 2.8
Retail PLNbn 0.4 0.4
Upstream PLNbn 0.8 1.2
Growth capex PLNbn 2.7 2.0

1) Strategic KPIs as at the end of 2017

2) 2016-2017 average provided to eliminate the effect of maintenance shutdowns in 2017

 

Downstream

In the Downstream segment (refining, petrochemicals, power generation), value creation is to be achieved through integrated value chain management, development of the product portfolio, and increase in the conversion ratio. Consistent improvement in key performance indicators (KPIs) as well as organisational structure optimisation and asset restructuring are expected to foster operational excellence of the segment.

In order to precisely define strategic objectives, certain key operational and financial indicators have been identified to measure performance levels.

  • In the period covered by the strategy, refining capacity utilisation is expected to reach 86%, taking into account the increase in total capacities to over 35m tonnes annually following the acquisition of Česka Rafinerska assets by Unipetrol a.s. A decrease in the capacity utilisation rate follows from the optimisation of crude processing at the ORLEN Lietuva refinery.
  • Further alignment of the sales models with the best practices and strengthening of the position in the domestic markets should translate into better sales efficiency.

Refining capacity utilisation1) [%]

Refining capacity utilisation1) Refining capacity utilisation and olefins production capacity utilisation are presented as the 2016–2017 average to neutralise the impact of one-off events, including longer maintenance shutdowns.

Olefins production capacity utilisation [%]

Olefins production capacity utilisation

Share of the Polish fuel market [%]

Share of the Polish fuel market

Construction of new power generation capacities, namely the Włocławek CCGT unit (463 MWe) and Płock CCGT unit (596 MWe), as well as upgrading existing assets, will drive the development of our industrial cogeneration. As a result, the segment is expected to achieve annual average LIFO-based EBITDA of PLN 3.9bn in 2014–2017.

LIFO-based EBITDA growth [PLNbn]

LIFO-based EBITDA growth

Retail

Value creation in the Retail segment is to be driven by the development of the network of modern CODO service stations, development of the DOFO channel, and 2.9pp higher fuel sales in the Group’s home markets (Poland, the Czech Republic, Lithuania, Germany).

Key indicators defining strategic objectives in this segment of PKN ORLEN’s business include:

  • Growth in the share of fuel sales in home markets [%]
  • Non-fuel margin growth [index]
  • Sales per service station, million litres

Higher share of retail sales in domestic markets [%]2)

Higher share of retail sales in domestic markets

2) Poland, the Czech Republic, Lithuania, Germany.

Non-fuel margin growth [index]

Non-fuel margin growth

In the Retail segment, we also plan to introduce new products and services and launch new Stop Cafe and shop formats under the ORLEN brand. The Company expects to further leverage the potential of its loyalty scheme and expand e-commerce services, which should translate into an increase in the service stations’ sales volumes and non-fuel margins by 2017.

Value creation in the Retail segment is expected to result in annual average EBITDA of PLN 1.5bn.

EBITDA growth [PLNbn]

EBITDA growth

Upstream

In the Upstream segment, we plan sustainable organic growth in Poland. To achieve this growth, we will focus on the most promising unconventional hydrocarbon areas and further development of conventional projects. We will continue exploration for oil and gas in Poland, as well as activities designed to adjust production technologies to the characteristics of unconventional hydrocarbon deposits. Production in Canada is expected to be further increased to 16 thousand boe per day, with a concurrent growth of 2P (proved and probable) reserves to 54m boe in 2017.

Hydrocarbon production [million boe per year]3)

Hydrocarbon production

3) Hydrocarbon production in Poland and Canada in 2017 at 0.2 million boe/year and 5.8 million boe/year, respectively.

Hydrocarbon reserves [million boe]4)

Hydrocarbon reserves

4) Hydrocarbon reserves: in Poland − 1m boe, in Canada − 53m boe

Number of wells, cumulatively at end of period

Number of wells

Our value building activities may include opportunistic asset acquisitions in Poland and in other markets, depending on the availability of free cash flow (FCF = LIFO-based EBITDA - CAPEX). We assume that the Upstream segment will generate annual average LIFO-based EBITDA of PLN 0.4bn.

EBITDA growth [PLNbn]

EBITDA growth