HELLENIC PETROLEUM Group announced strong financial results, according
to IFRS, with 1Q17 Adjusted EBITDA at €229m (+35%) and Adjusted Net Income at €126m
(+80%). Benchmark refining margins remained at high levels and operational
performance was improved in all Group activities.
Improved refining operations led to higher production (+11%) and sales
(+16%), with total turnover exceeding 4m MT.
All sales channels recorded growth, with exports up by 18% at 2.2m MT
and domestic market sales at 1.3m MT (+13%), reflecting strong heating gasoil
demand and increased market shares. Crude supply optimisation also had a
positive effect on financial results; the above led over-performance vs
benchmark margins higher compared to previous quarters.
Petrochemicals reported their strongest quarterly operational
profitability, despite weaker benchmark margins, while Marketing recorded
higher volumes and contribution to Group results.
1Q17 Reported Net Income amounted to €124m, vs €32m in 1Q16 (+287.5%),
as reduced oil prices volatility in the first months of 2017 had a limited
impact on inventory valuation.
Recovery of crude oil prices
Implementation of OPEC’s decision to reduce crude oil production led to
higher prices for most of 1Q17, with Brent averaging $55/bbl for the quarter,
up significantly vs 1Q16.
Macro developments and monetary policy in Eurozone and the US resulted
to the further strengthening of the US dollar, with EUR/USD at 1.06, the lowest
in the last 15 years.
The notable strength of fuel oil cracks was the key driver of Med
benchmark refining margins, with diesel crack also higher, while other products
were weaker. Med FCC benchmark margins averaged $5.9/bbl, the strongest since
2015, with Hydrocracking at $5.1/bbl vs $5.4/bbl last year.
Increased domestic market demand
Domestic fuels demand was up by 3% in 1Q17, with total consumption at
1.8m MT, due to colder weather conditions. Heating gasoil market was increased
by 11%, while transport fuels were lower by 2%. The marine & aviation
market was also higher by 26%, driven by bunkering demand.
Increased operational cash flows by 48%, lower
interest expense and balance sheet improvement
The implementation of Group financial strategy in
2016, with the new bond issue and the tender offer, as well as the improvement
of financial ratios and debt covenants, was the key lever for balance sheet
improvement.
Steadily strong operating cash flows (Adjusted EBITDA
– Capex) amounted to €211m, vs €143m in 1Q16, enabling better management of
debt obligations and working capital. As a result, gross debt continued the
decline reported in the last quarters, with a further reduction following the
repayment of the outstanding 8% 2017 notes post 31
st
March.
1Q17 Net Debt was €1.8bn, flat vs 4Q16. Furthermore, finance costs in 1Q17 were
4% lower and are expected to further reduce during the course of the year.
Key strategic developments
In E&P, the planned exploration works at Patraikos
Gulf area continued, while the Lease Agreement for offshore block 2 (JV with
Total – operator and Edison) is in final form and negotiations for offshore
blocks 1 and 10 are in process. The Lease Agreements for onshore areas
"Arta-Preveza” and NW Peloponisos” are expected to be signed in the next few
weeks. HELLENIC PETROLEUM expects the singing of all agreements and
ratification from the Greek Parliament in order to proceed immediately with the
start of exploration works.
Regarding the 35% indirect participation (through
DEPA) on DESFA share capital, the Group in cooperation with the HRADF, is
reviewing alternatives for the value maximisation of its participation.
Key highlights and contribution for each of the main
business units in 1Q17 were:
REFINING, SUPPLY & TRADING
Refining,
Supply & Trading 1Q17 Adjusted EBITDA at €190m (+39%).
Production
amounted to 3.8 million MT, on higher refining utilisation, with sales
exceeding 4m MT and exports at 55% of total.
White
products’ yield at 84%
PETROCHEMICALS
Increased integration between Aspropyrgos propylene
unit and Thessaloniki PP plants, as well as improved East Med products pricing,
led Adjusted EBITDA at €28m, the strongest quarterly performance on record.
MARKETING
1Q17 Marketing Adjusted EBITDA at €17m (+17%).
Domestic
Marketing volumes were significantly higher in all markets, leading Adjusted
EBITDA at €3m, vs €1m in 1Q16.
International Marketing sustained its profitability,
with Adjusted EBITDA at €10m.
ASSOCIATED COMPANIES
DEPA Group
contribution to consolidated Net Income came in at €27m, due to significant
demand increase from gas-fired electricity generators and other market
segments.
Elpedison’s EBITDA at €15m in 1Q17, on stronger
demand, increased participation of gas-fired units in domestic energy mix, as
well as tightness in the interconnected European market.