LOTOS plans to raise PLN 1bn for development

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General 2014-08-12
LOTOS plans to raise PLN 1bn for development

The Extraordinary General Meeting of Grupa LOTOS S.A. to be held on September 8th 2014 will decide whether to approve increasing the Company's share capital by issuing new shares, which would be offered to the Company’s existing shareholders. LOTOS expects to raise approximately PLN 1bn through the issue. The proceeds will be used to finance the Company’s strategy, which envisages further investments to increase the refinery's complexity and step up hydrocarbon production.   How much money is obtained from the issue will depend on the macroeconomic climate, capital market conditions, demand for the shares, and final terms and conditions of the offering.

In connection with the proposed share capital increase, Grupa LOTOS S.A. will offer PLN 55m new ordinary shares to its existing shareholders holding pre-emptive rights to acquire the shares. The proposed record date for the pre-emptive rights is November 18th 2014.

– Today, LOTOS is not only a pillar of Poland's energy security, but also an engine of the country's economic growth – says Paweł Olechnowicz, CEO of Grupa LOTOS. – By pursuing investment projects in Poland, we intend to foster industrial growth, create new jobs, and improve Poland's competitiveness on international markets. Following the successful implementation of the 10+ Programme, investments in state-of-the-art liquid fuel production technologies and development of our hydrocarbon exploration and production operations will be key to the Company's success.

The shareholders holding Company shares as at the end of the record date (i.e. November 18th 2014) will have pre-emptive rights to acquire the new shares. Each share held as at the end of the record date will confer one pre-emptive right.

The number of new shares which may be subscribed for in exercise of one pre-emptive right will be calculated and announced by the Company's Management Board prior to opening of the subscription. The pre-emptive rights exercise period will be specified in the prospectus for the new shares, which will be prepared and, following its approval by the Polish Financial Supervision Authority, published in connection with the public offering of the new shares.  

Impairment losses for the full amount of the Yme investment

As the decision-making process concerning the choice of the Yme field development concept is getting protracted (the decision was originally expected at the end of Q1 2014) and no development scenario has been selected, LOTOS has decided to recognise further impairment loss reducing the carrying amount of its Yme assets. As at June 30th 2014, the Group recognised impairment equal to the full amount of its investment in the Yme project, which will reduce the Group's net earnings for the first half of 2014 by about PLN 191m. The final amount of the impairment loss is undergoing a review and may change by the date of issue of the consolidated financial statements for H1 2014 (planned August 19th 2014).

Recognition of the impairment loss does not preclude the possibility of the Company using tax shield in Norway, enabling it to recover the funds invested in the Yme fields (e.g. by acquiring further production assets on the Norwegian Continental Shelf).

– LOTOS is a transparent company, strictly adhering to corporate governance rules. Given the failure of the Yme field operator and licence holders to reach a decision on the future of the project, the Management Board resolved to recognise an impairment loss for the full amount of the capital expenditure incurred by the Company on the Yme assets. In the context of our plans to issue new shares, this is a manifestation of our fair and responsible approach towards our current and future shareholders – said Mariusz Machajewski, Vice-President and Chief Financial Officer at Grupa LOTOS S.A. – Please note that LOTOS intends to apply the full amount of the issue proceeds to future investments in line with the 2013–2015 Effective and Rising Programme.

Time to invest

Based on its investment plans for the coming years, LOTOS intends to scale up its crude oil and natural gas production from Baltic Sea fields. Additionally, the Company plans to launch production from the B8 field at a rate of 250 thousand tonnes of crude annually by the end of 2015. The field's production potential is estimated at some 3.5 million tonnes of crude oil. The Company also plans to launch natural gas production from the B4 and B6 fields by the end of 2017. With the combined production potential of approximately 4 bcm, the fields are expected to yield 250 mcm of gas per annum.

To optimise production and improve the efficiency of the Gdańsk refinery, LOTOS plans to construct a number of facilities, including a delayed coking unit (DCU) and a hydrocarbon recovery unit (HRU). The DCU would improve the refinery's annual output of motor fuels by 900 thousand tonnes and allow it to increase its refining margin by approximately USD 2/bbl. The unit is scheduled to come on stream in 2017–2018. With the HRU, LOTOS would gain an additional 100 thousand tonnes of LPG and 25 thousand tonnes of gasoline annually, which will be placed on the market. The unit is scheduled to be placed in service in autumn 2016.

In the retail area, LOTOS intends to continue the dynamic expansion of its service station network and improve sales efficiency. In line with its strategy until 2015, the Company plans to achieve a 10% share in the retail fuel market (9.2% after Q1 2014).

Communications Office, Grupa LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland, tel. (+48) 58 308 87 31, (+48) 58 308 83 88, e-mail: media@grupalotos.pl


Not for release, publication or distribution, directly or indirectly, in or into the United States of America, Australia, Canada or Japan. This document has been prepared by Grupa LOTOS S.A. (the “Company”), is for informational purposes only and under no circumstances shall constitute an offer or invitation to make an offer, or form the basis for a decision, to invest in the securities of the Company. This document does not constitute marketing or advertising material within the meaning of Art. 53 of the Act on Public Offerings, the Conditions for Introducing Financial Instruments to an Organized Trading System, and Public Companies. A decision as to whether to increase the share capital of the Company has not been made yet. The extraordinary general meeting of the shareholders of the Company the agenda of which includes a resolution on the share capital increase has been convened to be held on 8 September 2014 (the “EGM”). The announcement regarding the convocation of the EGM was published on 12 August 2014 by means of current report No. 13/2014. On the same date, the draft resolution of the EGM regarding the share capital increase was published on the Company’s website (www.lotos.pl). In case of the adoption by the EGM of the resolution on the share capital increase by way of the issuance of new shares (the “Shares”) in the Company subject to pre-emptive rights, the Company intends to file with the Polish Financial Supervision Authority (the “PFSA”) a motion for the approval of a prospectus (the “Prospectus”) which will be the sole legally binding document containing information about the Company and the offering of its Shares in Poland (the “Offering”). The Company will be authorized to carry out the Offering only after the EGM has adopted the above-mentioned resolution and the Prospectus has been approved by the PFSA. The Company will make the Prospectus available pursuant to applicable law. This document does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of Finance Regarding Information Constituting Recommendations Concerning Financial Instruments or Issuers Thereof dated 19 October 2005. This document (and the information contained herein) does not contain or constitute an offer of securities for sale, or solicitation of an offer to purchase securities, in the United States, Australia, Canada or Japan, or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States of America, unless registered under the Securities Act or unless an exemption from the registration requirements set forth in the Securities Act applies to them. No public offering of the securities will be made in the United States of America. To the maximum extent permitted under the applicable provisions of law, no representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The information, opinions and forward-looking statements contained in this document are subject to change without notice. The forward-looking statements included in this document involve a number of known and unknown risks, uncertainties and other factors that could cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company does not undertake publicly to update or revise any forward-looking statement that may be made herein, whether as a result of new information, future events or otherwise. The information included in this document being the refining or exploration targets or other business outlook information shall be read as the internal targets of the Company and shall not be construed as financial projections or forecasts. These targets may or may not prove to be accurate. Neither the Company nor any of its subsidiaries or any other related entities shall be held accountable for any damage resulting from the use of this document or a part thereof, or its contents or in any other manner in connection with this document.