LOTOS Conference Call - 15.12.2016 - Strategy 2017 - 2022
|LOTOS Conference Call - 15.12.2016 - Strategy 2017 - 2022|
|Stability and sustainable growth. LOTOS Group strategy 2017 - 2022 EN|
“Stability and sustainable growth” – implementation over two time frames.
2017−2018; phase 1:
- cash flow stabilisation,
- debt reduction,
- continuation of investment projects in progress.
2019−2022; phase 2:
- a new investment programme comprising the best (most profitable) growth projects,
- the programme objectives and specific projects will be unveiled in 2018,
- the programme will be financed with profits generated by completed projects, and additionally facilitated by cost discipline, cost savings, and other measures.
The LOTOS Group seeks to position itself as:
- producer of premium quality fuels and chemicals, with the optimal degree of vertical integration,
- provider of specialist logistics and maintenance services, and
- leader in implementing innovative solutions within its core business,
with a view to ensuring sustainable value growth for Grupa LOTOS shareholders and supporting Poland’s energy security.
Grupa LOTOS has identified five strategic objectives:
- Effective use of production licences, further optimisation of refining technologies, launch of new products and alternative fuels, and commitment to quality,
- Consistent and repeatable reduction of operating expenses and optimisation of margins along the value chain,
- Readiness to develop and embrace innovation based on dedicated funding, an advanced model of cooperation with research institutions and creative engagement of employees,
- Flexible response to risks, perceived through potential business opportunities,
- Greater responsibility for security at large in accordance with Poland’s economic, environmental and energy policies (diversification of energy, feedstock and fuel supplies, OHS, cyber security, social responsibility).
In the period covered by the Strategy, the Management Board will seek to achieve and maintain Grupa LOTOS S.A.’s ability to pay dividends.
Key target metrics of the Grupa LOTOS S.A. Strategy for 2017−2022:
- doubling of average annual LIFO-based EBITDA in 2019−2022, to around PLN 4bn,
- reduction of net debt/LIFO-based EBITDA to no more than 1.5,
- execution of investment projects worth a total of PLN 9.4bn over six years,
- gaining access to 2P oil and gas reserves of 60 million boe or more,
- stepping up production to 30–50 thousand boe/day (barrels of oil equivalent per production day),
- expansion of the LOTOS retail chain to comprise 550 service stations,
- maintenance of LTIF (Lost Time Injury Frequency) below 3.
In the upstream business, Grupa LOTOS will optimise the mix of financing sources and consistently build a sound and balanced asset portfolio, based on projects in the pipeline.The Company intends to pursue more field development projects, capture market opportunities to enhance its portfolio of upstream assets, and reduce the portfolio share of licences covering mature fields.
In the refining business, the Company is set to remain at the cutting edge of technologies in Central Europe and compete in innovation. In its first phase, the Strategy will be implemented through the EFRA programme. The Company is contemplating three potential directions of building further competitive advantage based on newly developed refining assets – more details will be provided during the Strategy presentation.
In the retail business, the Company plans to optimise customer service and sales, revamp its loyalty scheme and introduce innovative products and services. It will improve service quality and strive to secure the lead in new generation fuels (CNG, LNG, electricity and hydrogen) as part of the LOTOS Energy Hub project.
Grupa LOTOS will develop new models of collaborative interaction with research institutions and start-ups based on joint research agendas and a dedicated innovation fund.
Capex in 2017−2022:
- PLN 2.0bn for projects in progress,
- PLN 4.1bn for projects pending FID (mainly in the upstream segment),
- PLN 3.3bn planned as additional expenditure after 2018 – for alternative projects to be ultimately selected in 2018, depending on their economics and market developments.