PGNiG makes a profit from high gas prices. Record-breaking third quarter in history

Global gas prices are rising, which is a good circumstance for PGNiG. As a result, the group recorded a historically record-high profit for the third quarter. It amounted to PLN 666 million. The reason is the increase in production and prices of extracted gas and oil.

Production from PGNiG’s Norwegian fields increased by as much as 130 percent. Every year. And this, together with the increase in the prices of gas and gas in storage, contributed to the record-breaking net profit for the third quarter
After the tariff changes, revenues from the sale of gas to external customers grew slower than the cost of obtaining gas
The company lost a lot of money on instruments hedging against drops in the gas price, which exceeded its real positions. PGNiG insured itself against falling prices, and these went up strongly
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In the third quarter of this year, the PGNiG Group sold natural gas for PLN 9.58 billion, while a year ago for PLN 4.08 billion – the company announced in the financial statements. Worldwide gas prices have been rising rapidly in Europe since August. On a 12-month scale, until the end of September this year. Dutch gas contracts rose by as much as 522 percent. – from 15.77 euro cents per MWh to 98.14 euro cents.

It turns out, however, that PGNiG’s margin has also increased. The group spent on gas in the third quarter of this year. PLN 7.24bn compared to PLN 2.55bn a year ago, so the difference between the cost of purchase and revenues from gas sales increased from PLN 1.52bn a year ago to PLN 2.33bn now. As you can see, the increase in European gas prices served PGNiG’s results.

The group’s net profit increased by as much as 474 percent. yoy up to PLN 666 million. And the growth is not so high only by comparing it with the pandemic – never in the history of the PGNiG group in the third quarter has earned so much. So far, the third quarter of 2014 was record-breaking, when the net profit amounted to PLN 616 million.

Another thing is that the PGNiG group sold more gas to external customers than a year earlier. In the third quarter it was 5.89 billion cubic meters. while a year earlier 5.32 billion cubic meters, i.e. an increase year on year amounted to over 9%.

However, the stock exchange did not react positively to the above data. PGNiG’s share price drops by more than 3 percent. in the morning on Friday.

Profits on extraction, losses on trade

The largest increase in profit was recorded by the PGNiG group in the exploration and production segment. The selling prices of the extracted gas increased and EBITDA (operating result increased by depreciation) increased to PLN 2.67 billion in the third quarter of this year from PLN 0.48 billion a year ago.

Distribution profits also increased to PLN 544 million from PLN 363 million a year ago (EBITDA). PGNiG explains this with an increase of 3.6 percent. tariffs for the gas distribution service from February this year. and 12.4 percent since August. Another increase of 7.4 percent. it was already in October.

It has increased too distribution volume and it is by as much as 16 percent. yoy on a three-quarter scale ie by about 1,284 million cubic meters. PGNiG explains that the average temperature this year is lower by 1.28 degrees Celsius than a year ago. In the third quarter alone, the average temperature was 0.72 degrees C lower than a year ago in the corresponding period.

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On the other hand, the results of the trading and storage segment decreased. EBITDA was even negative and amounted to PLN -916 million in the third quarter. How does the company explain it? Despite the increase in tariffs in May and August, at the same time PGNiG had to pay much more for gas from domestic production. Revenue increased by 143 percent. yoy to PLN 9.55 billion, but gas fuel costs were higher by as much as 228 percent. yy and amounted to PLN 9.43 billion.

This factor was partially offset by hedging instruments included in hedge accounting (ie hedging real positions). When it comes to sales revenues, these instruments subtracted PLN 79 million (a year ago they added PLN 86 million), and when it comes to inventories, they reduced acquisition costs by PLN 385 million (a year ago it gave a profit of PLN 80 million).

On the other hand, other hedging instruments (non-hedge accounting) brought a loss of as much as PLN 812 million compared to the loss of PLN 34 million a year ago. PGNiG apparently hedged against declines in gas quotations on the global market, and the prices of gas increased significantly.

Greater production in Norway

The increase in production along with rising gas prices had a key impact on the increase in profit. Production in Norway increased by as much as 130 percent. yoy up to 257 million cubic meters in the third quarter of this year, and only slightly by 2 percent. in Pakistan fell to 80 million cubic meters.

PGNiG estimates that in 2022, its own gas production on the Norwegian Continental Shelf will be about 2.6 billion cubic meters. – PGNiG’s vice-president for operational affairs, Robert Perkowski, announced on Thursday at the results conference.

As for oil, although in Poland it was possible to extract by 9 percent. less gas year on year (145,000 tons), Norway managed to obtain more by 26 percent. yoy (185 thousand tons).