Record high production and exports, as well as the positive
refining environment drive strong Group results.
Significant negative impact on reported results from
crude oil price decline
HELLENIC
PETROLEUM Group reported its strongest 4Q performance, leading to a FY Adjusted
EBITDA of €417m (2013: €178m) and recording a positive Net Income. Performance
was improved in all business units, some of which reported record high
contribution. In refining, results were driven by the favorable
international
refining environment during the second half of the year, as well as improved
refining operations, following the de-bottlenecking works at Elefsina earlier
in the year. Further support came from continuous cost control efforts
and
growth in exports, accounting for c. 50% of total sales.
Contribution
of Marketing activities was also higher: EKO and HF profitability came in at
4-year high, as a result of the transformation initiatives implemented over the
last two years. The
Group’s international subsidiaries reported
their highest contribution ever, despite challenging local market conditions.
Finally, Petrochemicals also
improved performance, with record
high profitability.
Reported
results were severely affected by the sharp decline of crude oil prices,
impacting year-end valuation of inventory. As Hellenic Petroleum maintains a
high inventory level as part of its Compulsory Stock Obligations, the total
loss from the price drop in 2014 was €484m, turning positive operating results
for the year to a Net loss of -€365m.
Group
cashflow was also positive, as, during the last quarters, increased
profitability, combined with normalised capex levels, led to reduced leverage.
In
terms of funding, despite the continued challenges, the Group’s position
improved following the Eurobond issues and the renegotiation of existing credit
facilities. Strategic targets on both tenure (maturity profile) and
diversification (DCM vs Banks) have been achieved and interest cost
s
are
gradually being reduced. Given continuing market volatility, the management of
liquidity risk and security of supply for our core markets remain key priorities
and these are being addressed by holding a relatively high average cash
balance, with a commensurate negative impact on interest costs.
Capital
expenditure, at €136m, mainly relates to stay-in-business projects, the
turn-around of Elefsina and smaller growth projects.
Key figures for 4Q and FY 2014 are summarised below:
4Q13
|
4Q14
|
All numbers in €m
|
2013
|
2014
|
2,915
|
3,981
|
Refining Sales Volumes (‘000 ΜΤ)
|
12,696
|
13,538
|
45
|
1
71
|
Adjusted
EBITDA
|
178
|
41
7
|
(6)
|
(3
75)
|
Inventory effect
|
(70)
|
(4
84)
|
(11)
|
(
206)
|
EBITDA
|
29
|
(8
4)
|
(35)
|
53
|
Adjusted
Net Income
|
(117)
|
5
|
(98)
|
(2
27)
|
Net Income
|
(269)
|
(3
65)
|
55
|
51
|
Capex
|
112
|
13
6
|
-
|
-
|
Gearing
|
43%
|
40%
|
2.3
|
4.0
|
ELPE benchmark refining margin ($/bbl)
|
2.1
|
2.8
|
Significant drop in crude oil prices and further improvement of European
benchmark refining margins; stronger dollar vs euro in 4Q14
Global oil
supply surplus continued in 4Q14 mainly due to increased production in US and
Iraq and OPEC’s decision to maintain its output unchanged. As a result, crude
prices dropped to their lowest since May 2009, with January 2015 Brent crude
oil price falling below $50/bbl; a decline of $45/bbl in 4Q14 and more than $65/bbl
in 2H14.
US dollar
strengthened further vs euro q-o-q, with a positive effect on $ driven
benchmark margins. Euro averaged $1.25 in 4Q14, the lowest since 2006.
Reduced
energy costs, due to weak crude prices and lower diesel imports from North
America were among key factors that supported benchmark margins improvement
during 2H14, reversing the challenging environment of the first half. Benchmark
Med FCC margins averaged $3.4/bbl, (2013: $2.4/bbl), while Hydrocracking came at
$4.5/bbl (2013: $3.7/bbl).
Demand growth in domestic fuels market
Domestic
fuels demand in 2014 amounted to 6.7 million tones, according to preliminary official
market data, recording a
1.5% growth, for first time since
2009
. Diesel consumption increased, outweighing gasoline
demand reduction, with diesel cars accounting for 60% of new car registrations.
Furthermore, low prices coupled with the reduction of excise duty led to a 5%
increase in the demand for heating gasoil.
Strong operating results in 4Q14
Group Adjusted
EBITDA
came in
at €171m (4Q13: €45m), reflecting
mainly the enhanced contribution from refining operations. Elefsina refinery
rebased its contribution, with high utilisation rates and consistent
over-performance throughout the quarter. Furthermore, both Marketing and
Petrochemicals increased contribution.
The large drop
in crude oil and product prices resulted in inventory losses of €375m, leading
4
Q
14 Reported EBITDA to -€206 (4Q13: -€11m), while Net Results
amounted to -€227 (4Q13: -€98m).
Operating
cashflow was positive for
the
second
consecutive quarter, reflecting both improved performance and normalized capex.
Net debt at €1.1bn, lower vs last year, with gearing at 40% (4Q13: 43%). In
4Q14, the Group renewed c.€1.5bn credit facilities with Greek banks, further
improving commercial terms, maturity and cost. Moreover, in the first weeks of
2015, the Group signed a 3-year, €200m
revolving
credit facility
, which further added
to the cash balance.
Regarding
the
sale of
66% of DESFA share capital to SOCAR, the regulatory approval is in progress,
with the approval of the European Competition Authorities being the final step
for the completion of the regulatory clearance.
Exploration and Production in Greece
On 6 February 2015, HELLENIC PETROLEUM submitted offers
for the lease of Arta-Preveza and NW Peloponnese areas in West Greece, following
a relevant tender by the Ministry of Production Restructuring, Environment
& Energy. In the West Patraikos Gulf area, where HELLENIC PETROLEUM acts as
operator in a
JV
with Edison International SpA and Petroceltic
Resources Plc, exploration activities have started.
John
Costopoulos, Group CEO, commented on 4Q14 performance:
“In the fourth quarter, the Group reported strong
operating profitability, on better global refining environment and the improved
performance of all business units.
During 2014, Hellenic Petroleum realized the benefits
of the strategic transformation projects implemented over the last few years
such as (a) the upgrade of the refineries, (b) competitiveness
improvement
and (c) retail business model transformation. Indications of this
performance are the achievement of the highest ever production volume and
exports sales,
as well as
the
over-performance of our refineries vs benchmark
margins. Furthermore, in 2014 we successfully completed the refinancing
strategy and managed liquidity and credit risks, despite the continuous
challenges and volatility for Greek corporates.
In line with all refiners who hold significant
inventories, the negative
impact of
crude oil
price affected our otherwise strong results.
For 2015, we plan for an equally challenging
environment, as commodity markets volatility, the start-up of new competitive
refineries in the Middle East and uncertainties in the economy are expected to
continue. HELLENIC PETROLEUM will continue to focus on competitiveness,
operational excellence and prudent management of business and financial risk
,
to
deliver sustainable benefits for our shareholders, personnel and all
stakeholders.
”
Key highlights and contribution for each of the main
business units in 4Q14 were:
REFINING, SUPPLY & TRADING
Domestic
Refining, Supply & Trading 4Q14 Adjusted EBITDA at €133m (4Q13: €
22
m).
Production
exceeded 4 million tones for the first time on record, on high utilisation,
with middle distillates yield at 54%.
Domestic
market sales increased by 11%, while exports reached a record high of 2.1
million tones,
leading total sales at
4 million tones
.
DOMESTIC MARKETING
Domestic
Marketing sales volumes were 9% higher, mainly driven by heating gasoil and
auto diesel. 4Q14 Adjusted EBITDA at €2m (4Q13:
€1
m
).
Further improvement
in market shares continued, supported by our COMO network expansion (139 petrol
stations end-2014) and successful introduction of differentiated products - BP
ULTIMATE DIESEL and EKO AVIO DIESEL.
INTERNATIONAL MARKETING
International
Marketing sales volumes increased significantly by 17%, mainly on the back of
Thessaloniki refinery exports to Bulgaria wholesale market.
Adjusted
EBITDA came at €13m (+19%) with full year contribution exceeding 12% of total
Group results.
PETROCHEMICALS
Strong PP margins,
record high propylene production at Aspropyrgos refinery and cost control led to
strongest ever quarterly Adjusted EBITDA of €26m (4Q13:
€11m
).
ASSOCIATED COMPANIES
DEPA Group
contribution to consolidated Net Income came at €7m (vs €
10
m in 4Q13),
due to weak demand from gas-fired electricity generators.
Elpedison
EBITDA at €11m (4Q13: €17m) on reduced production.
Key
consolidated financial indicators (prepared in accordance with IFRS) for 4Q and
FY 2014 are shown below:
€ million
|
4Q13
|
4Q14
|
% Δ
|
FY13
|
FY14
|
% Δ
|
P&L figures
|
|
|
|
|
|
|
Refining Sales Volumes (‘000 ΜΤ)
|
2,915
|
3,981
|
37%
|
12,696
|
13,538
|
7%
|
Sales
|
2,227
|
2,378
|
7%
|
9,674
|
9,474
|
-2%
|
EBITDA
|
(11)
|
(206)
|
-
|
29
|
(84)
|
-
|
Adjusted EBITDA 1
|
45
|
171
|
-
|
178
|
417
|
-
|
Net Income
|
(98)
|
(227)
|
-
|
(269)
|
(365)
|
-
|
Adjusted Net Income 1
|
(35)
|
53
|
-
|
(117)
|
5
|
-
|
Balance Sheet
Items
|
|
|
|
|
|
|
Capital Employed
|
|
|
|
3,905
|
2,870
|
-26%
|
Net Debt
|
|
|
|
1,689
|
1,140
|
-33%
|
Debt Gearing (ND/ND+E)
|
|
|
|
43%
|
40%
|
-
|
1. Calculated as Reported adjusted for
inventory effects and other non-operating items.
Note
Founded in 1998, Hellenic Petroleum( ELPE) is one of
the leading energy groups in South East Europe, with activities spanning across
the energy value chain and
presence in 7 countries.