Capitals:

Pillars and strategic assumptions

2015 was the first full year of implementing the Strategy for 2014−2017. It envisages the pursuit of growth-oriented projects in the most promising areas through strengthening of the integrated value chain, the Company’s financial strength, and modern management culture.

ORLEN Group Strategy
1) Annual average LIFO-based EBITDA (operating profit before depreciation and amortisation, with inventory valued using the LIFO method) in 2014−2017
2) DPS – dividend per share

Pillars of the ORLEN Group Strategy

VALUE CREATION – the Company will focus on securing a strong position on large and promising growth markets, strong customer-oriented approach, operational excellence, strengthening the integrated value chain, and sustainable development of its upstream operations.

FINANCIAL STRENGTH – consistent increase in dividend per share (DPS) is one of ORLEN’S strategic objectives. Our dividend policy envisages dividend payments with due consideration given to the strategic objective of maintaining safe financial fundamentals and to macroeconomic forecasts.

PEOPLE – responsibility for people, the environment and trading partners: no tolerance for accidents, responsible approach to local communities, the natural environment and trading partners. Focus on human capital and innovation: consistent efforts to build an experienced and competent team, stable increase in research and development spending and implementation of innovative solutions.

INVESTMENTS (CAPEX) − growth-oriented capex planned for 2014−2017 amounts to PLN 10.8bn, including PLN 6.4bn in the Downstream segment, PLN 1.2bn in the Retail segment and PLN 3.2bn in the Upstream segment. PLN 5.5bn has been allocated to projects designed to maintain high performance of production units and ensure compliance with regulatory requirements.

Strategic assumptions by segment

Strategic assumptions by segment

Key success factors of the Strategy for 2014–2017

  • ORLEN Group’s EBITDA − EBIT plus depreciation and amortisation.
  • Net financial leverage − net debt to equity ratio (based on average values in the period) x 100%.
  • Net debt – non-current loans and borrowings + current loans and borrowings - cash and cash equivalents.
  • Share of Polish fuel market − the ratio of the volume of fuels (petrol, diesel fuel and light fuel oils) sold by PKN ORLEN to the total volume sold on the market.
  • Refining capacity utilisation − the ratio of processing capacities of a refinery to actual throughput.
  • Olefins production capacity utilisation − the ratio of actual production of units’ products  to the theoretical production capacities.
  • Olefin unit − steam cracking unit, where in a high temperature, in the presence of steam, alkanes (saturated hydrocarbons with single bonds only between carbon atoms) are transformed into alkenes (hydrocarbons with one carbon-carbon double bond). Alkenes are classified as olefins, which has given the unit its name. The process consists in transforming ethane, propane, butane and lower gasoline fractions (or even heavy fuel oil and hydrocracking residuum) mainly into ethene (commonly known as ethylene) and propene (propylene). The by-products are post-pyrolysis fractions: c4, post-pyrolysis gasoline and post-pyrolysis oil.
    Ethylene and propylene may later be used in various processes to manufacture a wide array of products, from polyolefins (polyethylene and polypropylene), to various plastics, to PVC (polyvinyl chloride) or glycol (antifreeze liquids).
  • Crude processing at the ORLEN Group − total volume of crude oil processed by the ORLEN Group’s refineries.
  • Fuel yield – aggregate medium and light distillate yields.
  • Share of fuel sales in home markets − volume of fuels sold by the ORLEN Group at service stations in Poland, Germany and Lithuania.
  • Sales per service station − average sales of fuels and non-fuel products and services (shops and food services) per service station.
  • Hydrocarbon production − total volume of hydrocarbons (including natural gas, crude oil, condensate and the other liquid hydrocarbons – ethane, propane and butane) produced from fields and treated to the extent enabling them to be transported and sold.
  • Hydrocarbon reserves − RESERVES are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of the evaluation date) based on the development project(s) applied. Reserves are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by development and production status.

Detailed assumptions underlying the Strategy in individual areas

    Average 2014–2017 Actual 2014 Actual 2015
Financial KPIs
LIFO-based EBITDA PLNbn 5.1 5.2 7.7
LIFO-based EBITDA
Downstream
PLNbn 3.9 4.2 7.6
LIFO-based EBITDA Retail PLNbn 1.5 1.4 1.5
LIFO-based EBITDA Upstream PLNbn 0.4 0.2 -0.8
Financial leverage1 % < 30% 33% 28
Net debt/LIFO-based EBITDA x < 2 1.3 0.7
KPIs − Downstream
Share of Polish fuel market1 % 66 61 58
Refining capacity utilisation2 % 86 84 90
Olefins production capacity utilisation2 % 86 83 74
Crude processing at PKN ORLEN Group2 m tonnes 30.3 27.3 31
Fuel yield2 % 78.5 76.9 79
KPIs – Retail
Share of fuel sales in home markets1 % 17.0 14.4 14.5
Sales per service station1 m litres 3.8 3.8 3.6
Number of service stations x 2, 688 2, 692 2, 679
KPIs − Upstream
Hydrocarbon production1 Mboe per year 6.0 2.1 2.6
Hydrocarbon reserves1 Mboe 54 50 98
Number of wells1 cumulatively 147 40 53

1) Strategic KPIs as at the end of 2017.

2) 2016−2017 average provided to eliminate the effect of maintenance shutdowns in 2017.

3) Strategic goal for 2014-2017

See also

ORLEN Group's business modelThe ORLEN Group and its environment

see more

Outlook 2016+Our ORLEN Strategy

see more

ORLEN Group – Key events in 2015Our operations in 2015

see more

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