Orlen Spolka Akcyjna · GPW:PKN
Orlen Spolka Akcyjna — ORLEN Group — Investor Presentation (December 2018)
32 slides from Orlen Spolka Akcyjna's investor presentation, December 2018
Slide 1: ORLEN Group Strategy Update for 2019-2022
ORLEN Group Strategy Update for 2019-2022 ~*
Slide 2: Agenda
§ Agenda 1 ORLEN GROUP TODAY 2 —_ ORLEN GROUP UNTIL 2022 3 SUMMARY 4 SUPPORTING MATERIALS
Slide 3: We have delivered the key targets for 2017 and 2018
We have delivered the key targets for 2017 and 2018 VALUE CREATION gs FINANCIAL STRENGTH Profit Growth Strengthening of fundamentals Dividend Modern management culture Before impairment of assets - in 2017-2018 on average PLN -0.1bn, chiefly in Upstream 2017-2018 averages include 2017 actuals and 20
Slide 4: We have also implemented new measures to drive further growth
We have also implemented new measures to drive further growth of the ORLEN Group Grupa LOTOS acquisition process' PKN ORLEN petrochemicals expansion programme Taking full control of Unipetrol Improved situation at ORLEN Lietuva Preparations for offs project Securing foothold in alternative fuels mar
Slide 5: We maintain a strong position across our key business segments
We maintain a strong position across our key business segments » » or’ ~153 mboe of 2P reserves in Canada and Poland Average production in Canada and Poland: ~17 thousand boe/d » » » » DIVERSIFICATION OF OIL SUPPLY SOURCES (ca. 30% are grades other than REBCO) 6 REFINERIES in Poland, Czech Republic
Slide 6: Agenda
§ Agenda 1 ORLEN GROUP TODAY 2 ORLEN GROUP UNTIL 2022 » CHALLENGES 2030+ » STRATEGY 2019-2022 >» TARGETS 2019-2020 3 SUMMARY 4 SUPPORTING MATERIALS
Slide 7: We take a multidimensional view of the future
We take a multidimensional view of the future and review our strategy on a regular basis Approach to strategic planning at the ORLEN Group >» Energy sources CHALLENGES >> Climate and natural »> environment >» Groundbreaking technology EEE >» Consumer behaviour STRATEGY »> >> Macro trends >» Regulati
Slide 8: The role of crude oil will not change significantly before 2030+
The role of crude oil will not change significantly before 2030+, with demand for refinery products in CEE forecast to continue growing Global energy consumption Growth in demand for key transport fuels and petrochemical million boe/d products in Europe CAGR 2018-2030, % 325 Western Central 289 Euro
Slide 9: We identify trends that will drive significant changes in the fuel industry
We identify trends that will drive significant changes in the fuel industry until 2030+ Growing regulatory pressure to mitigate climate change and promotion of a low-carbon circular economy (EU ETS, IMO) are affecting the entire production cycle Alternative fuels Alternative fuels (electromobility,
Slide 10: Agenda
§ Agenda 1 ORLEN GROUP TODAY 2 ORLEN GROUP UNTIL 2022 » CHALLENGES 2030+ » STRATEGY 2019-2022 >» TARGETS 2019-2020 3 SUMMARY 4 SUPPORTING MATERIALS
Slide 11: Pillars and update of PKN ORLEN's Strategy for 2019-2022
Pillars and update of PKN ORLEN’s Strategy for 2019-2022 Value creation © Financial strength Downstream: scaling up petrochemical production, further integration of refinery assets and expanding low-emission energy generation Retail: expanding the retail network and strengthening customer relations
Slide 12: Downstream 2019-2022: Scale-up of petrochemical production
Downstream 2019-2022: Scale-up of petrochemical Wai VALUE production, further integration of refinery assets and expansion of low-emission energy generation Feedstock security ¢ Further diversification of crude supplies * Securing natural gas supplies * Building a competitive advantage based on low-
Slide 13: Retail 2019-2022: expanding value creation of the retail network
VALUE CREATION Retail 2019-2022: expanding value creation of the retail network and strengthening customer relations Modern network of service stations MODERN SERVICE STATION NETWORK’ * Developing in-store and food sales * Increasing non-fuel margins by over 30% * Continued efforts to enhance techni
Slide 14: Upstream 2019-2022: cautious continuation
VALUE CREATION Upstream 2019-2022: cautious continuation Further production increase PRODUCTION IN POLAND AND CANADA' * Production increase to ca. 25,000 boe/d (i.e. by ca. 7.000 boe/d) at the Group level * Share of liquid hydrocarbons? + Poland: 6% » Canada: 49% * Wells (net) optimised to 13.8: + P
Slide 15: Culture of innovation: supporting innovation and expanding R&D base
% ‘CULTURE OF INNOVATION Supporting innovation and expanding R&D base Building a culture * Promoting internal and external innovation within the organisation of innovation ¢ Creating an innovation-conducive environment in the ORLEN Group Strategic ¢ Development of the PKN ORLEN Strategic Research Ag
Slide 16: Focusing on safety, natural environment and local communities
Focusing on safety, natural environment and local communities Health and safety at work Environmental protection Zero tolerance policy towards == Aligning PKN ORLEN with new Cy) accident hazards ou environmental requirements No accidents at work : . . fore Reducing environmental impacts Further impr
Slide 17: Financial strength: flexibility and readiness for market challenges
Financial strength: flexibility and readiness for market challenges Solid * Investment grade rating fundamentals + Financial geraring below 30% by 2022 * Net debt/EBITDA covenant below 1.5 by 2022 Secured * Diversified financing financing * Opportunistic non-organic growth Dividend payments * Regula
Slide 18: Agenda
§ Agenda ORLEN GROUP TODAY 2 ORLEN GROUP UNTIL 2022 CHALLENGES 2030+ STRATEGY 2019-2022 » TARGETS 2019-2020 SUMMARY SUPPORTING MATERIALS
Slide 19: Downstream: 2019-2020 targets
Downstream: 2019-2020 targets CAPEX in Downstream PLNbn 1,2 2.9 2.5 2.8 08 Growth 17 1.0 Maintenance 1.8 “4 and regulatory 1.2 2017 2018F' 2017-2018 ray 2019-2020 average? average EBITDA LIFO PLNbn 2017 2018F' 2017-2018 A 2019-2020 average” average Q1-Q3 actuals and Q4 fore nclude 2017 actuals and 2
Slide 20: Retail: 2019-2020 targets
Retail: 2019-2020 targets CAPEX in Retail PLNbn 0.7 0.7 Growth 0.5 05 Maintenance and regulatory 0.2 0.2 2017 2018F' 2017-2018 my 2019-2020 average? average EBITDA LIFO PLNbn 2.3 2.0 2.2 2017 2018F' 2017-2018 a 2019-2020 average? average 2018 forecast based on Q1-Q3 actuals and Qa forecast >> ORLEN
Slide 21: Upstream: 2019-2020 targets
Upstream: 2019-2020 targets CAPEX in Upstream PLNbn Growth 2017 2018F? EBITDA LIFO PLNbn 0.3 0.3 2017' 2018F? 2017 EBITDA before impairment of assets 2 2018 forecast based on QI-Q3 actuals and Q4 forecast 2017-2018 averages include 2017 actuals and 2018 forecast, based on Q1-@3 actuals and @4 foreca
Slide 22: Capital expenditure focused on growth
Capital expenditure focused on growth CAPEX by segment Maintenance and regulatory Other Retail 2.9 (43%) 3.9 (57%) Downstream CAPEX by country Germany Lithuania Poland 100% = PLN 6.8bn » 22
Slide 23: Average full-year EBITDA LIFO to increase by PLN 1.1bn
Average full-year EBITDA LIFO to increse by PLN 1.1bn in 2019-2020 vs 2017-2018 EBITDA LIFO by segment PLNbn Downstream ORLEN Group* 8.7 [| : : “i 2017 2018F' 2017-2018 2019-2020 10.4 1.1 10.3 average” average 79 9.2 — Detal 2.0 2.3 2.2 0.2 2.4 2017 2018F' 2017-2018 A 2019-2020 2017 2018F' 2017-2018
Slide 24: Agenda
§ Agenda 1 ORLEN GROUP TODAY 2 ORLEN GROUP UNTIL 2022 4 SUPPORTING MATERIALS
Slide 25: Summary
Summary Better-than-expected earnings in 2017 and 2018 are solid foundation for further growth ¢ Higher profit genertation * Growth programme execution * Strong financial fundamentals and dividend payments * Constant changes in energy markets and growing prominence of alternative fuels * Oil should
Slide 26: Agenda
§ Agenda 1 ORLEN GROUP TODAY 2 ORLEN GROUP UNTIL 2022 3 SUMMARY 4 SUPPORTING MATERIALS
Slide 27: Macroeconomic assumptions
j Macroeconomic assumptions Model downstream margin USD/bbl 12.2 13.5 Brent/Urals differential USD/bbl 1.4 3.1 Model refining margin + differential USD/bbl 7.1 8.6 Model petrochemical margin EUR/t 900 808 Brent crude price USD/bbl 64 73 Canadian Light Sweet crude price CAD/bbl 66 73 Natural gas pric
Slide 28: Definitions of Key Performance Indicators (KPIs)
Definitions of Key Performance Indicators (KPIs) Area Unit Definition 2P reserves boe Proven and probable reserves of hydrocarbons Netback PLN/ Average realised price less costs of production (transport, marketing and production costs) boe and production taxes per barrel of oil equivalent Production
Slide 29: Abbreviations and acronyms
Abbreviations and acronyms bbl Barrel — unit of liquid measure used in the oil industry. 1 barrel of oil = 42 US gallons = 158.9683 litres (ca. 159 litres). In Europe, crude oil is commonly measured in tonnes boe Barrel of oil equivalent. It is customarily used to measure the heating value of fuels
Slide 30: Abbreviations and acronyms
Abbreviations and acronyms REBCO Russion Export Blend Crude Oil RED I/RED II Renewable Energy Directive I/II Solomon ranking/ Comparative analysis of key areas of manufacturing performance (efficiency, maintenance, margin, return on investment, benchmarking operating expenses) against industry leade
Slide 31: Legal disclaimer
Legal disclaimer This Presentation has been prepared by PKN ORLEN (“PKN ORLEN” or the “Company”). Reproduction, distribution and transmission of this Presentation in other jurisdictions may be restricted by law, and recipients should inform themselves about and observe any such restrictions. Failure
Slide 32: Williams Racing Official Partner
ae WILLIAMS RACING } ‘OFFICIAL PARTNER