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Financial information
The past year ushered in a series of challenges for the companies in the fuel sector. The decisions made by us have demonstrated that we are able to take rapid steps to adapt to a demanding environment and ensure the desired profitability for our projects.
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Segment performance
The segmental management model we have implemented enhances management efficiency, delivering cost and revenue synergies across the organization.
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Letter from the Vice-President of the Board
2014 ushered in a series of challenges for the companies in the fuel sector. The decisions made by the LOTOS Group have demonstrated that we are able to take rapid steps to adapt to a demanding environment and ensure the desired profitability for our projects.
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Business environment
The key factor that had a strong impact on both the global and Polish petroleum markets in 2014, with significant consequences for the LOTOS Group’s performance, was the price of crude oil, which also determined the price of petroleum products.
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Strategic objectives
The LOTOS Group’s Strategy is designed to strengthen our position as a strong, innovative and efficient business which plays a major role in ensuring national energy security.
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Business model
Our operations consist in crude oil production and processing, as well as wholesale and retail sale of petroleum products, among which are: fuels (unleaded gasoline, diesel oil and light fuel oil), heavy fuel oil, bitumens, aviation fuel, naphtha, propane-butane LPG and base oils.
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Risk and opportunities
At the LOTOS Group, we identify a range of diverse risks, which may affect all areas of our business. The key risks in terms of their impact on our operations are the financial risks as well as risks affecting the exploration and production area. In the analysis of the risks, we also factor in issues related to sustainable development.
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Key data 2014
With revenue of ca. PLN 28.5bn in 2014, we rank fourth in the group of 500 largest businesses in Poland.
← Statement Notes index
2. Composition of the Group and its changes
The LOTOS Group comprises Grupa LOTOS S.A. (the Parent) and a number of production, service and trading companies which are direct or indirect subsidiaries of Grupa LOTOS S.A.
The Group also holds shares in equity-accounted joint ventures.
Contact data and brief description of the principal business activity of these entities, as well as the Group’s ownership interests and the applied consolidation method are presented below.
| Name | Registered office | Principal business activity | The Group’s ownership interest |
|
|---|---|---|---|---|
| Dec 31 2014 | Dec 31 2013 | |||
| Parent | ||||
| Downstream segment | ||||
|
Gdańsk | Production and processing of refined petroleum products (mainly fuels) and their wholesale | Not applicable | Not applicable |
| Direct fully-consolidated subsidiaries | ||||
| Upstream segment | ||||
|
Gdańsk | Acquisition of crude oil and natural gas deposits, extraction of hydrocarbons | 99.99% (1) | 99.98% |
| Downstream segment | ||||
|
Gdańsk | Wholesale and retail sale of fuels and light fuel oil, management of the LOTOS service station network | 100.00% | 100.00% |
|
Gdańsk | Production and sale of lubricating oils and lubricants, and sale of base oils | 100.00% | 100.00% |
|
Gdańsk | Production and sale of bitumens | 100.00% | 100.00% |
|
Gdańsk | Railway transport | 100.00% | 100.00% |
|
Gdańsk | Maintenance of mechanical and electric operations and controlling devices, overhaul and repair services | 100.00% | 100.00% |
|
Gdańsk | Laboratory testing | 100.00% | 100.00% |
|
Gdańsk | Fire service activities | 100.00% | 100.00% |
|
Gdańsk | Security services | 100.00% | 100.00% |
|
Czechowice-Dziedzice | Storage and distribution of fuels | 100.00% | 100.00% |
|
Jasło | Storage and distribution of fuels Renting and operating of own or leased real estate | 100.00% | 100.00% |
| Other | ||||
|
Kraków | Dormant | 100.00% | 100.00% |
|
Jasło | Dormant | 100.00% | 100.00% |
| Non-consolidated direct subsidiaries | ||||
|
Gdańsk | Dormant | 100.00% (4) | - |
| Indirect fully-consolidated subsidiaries | ||||
| Downstream segment | ||||
| LOTOS Infrastruktura Group | ||||
|
Czechowice-Dziedzice | Production and distribution of electricity, heat and gas | 100.00% | 100.00% |
| LOTOS Terminale Group | ||||
|
Czechowice-Dziedzice | Production of fatty acid methyl esters (FAME) | 100.00% | 100.00% |
| Upstream segment | ||||
|
||||
|
Norwegia, Stavanger | Oil exploration and production on the Norwegian Continental Shelf, provision of services incidental to oil and gas exploration and production | 99.99% (5) | 99.98% |
|
Curaçao | Sea transport services (dormant) | 99.99% (5) | 99.98% |
|
Gdańsk | Support activities for extraction and quarrying operations | 99.99% (5) | 99.98% |
|
Gdańsk | Exploration for and production of crude oil and natural gas | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Storage and transport of crude oil, other sea transport services | 99.99% (5) | 99.98% |
|
Gdańsk | Sea transport support activities, ship operation advisory services | 99.99% (5) | 99.98% |
|
Gdańsk | Provision of sea transport and related services | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Provision of sea transport and related services | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Management of own assets | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Ship chartering | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Ship chartering | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Ship chartering | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Ship chartering | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Ship chartering | 99.99% (5) | 99.98% |
|
Cypr, Nikozja | Ship chartering | 99.99% (5) | 99.98% |
|
Litwa, Gargżdai | Crude oil exploration and production, drilling services, and purchase and sale of crude oil | 99.99% (5) | 99.98% |
|
Litwa, Gargżdai | Crude oil exploration and production | 99.99% (5) | 99.98% |
|
Litwa, Gargżdai | Crude oil exploration and production | 99.99% (5) | 99.98% |
| Other | ||||
| GK LOTOS Petrobaltic S.A. | ||||
|
Władysławowo | Production of electricity, heat, LPG and natural gas condensate | 99.99% (5) | 99.98% |
| Equity-accounted joint ventures | ||||
|
Gdańsk | Sale of aviation fuel and logistics services | 50.00% | 50.00% |
| LOTOS Petrobaltic Group | ||||
|
Gdańsk | Oil and gas production (support activities for oil and gas production) | 49.99% | 49.99% |
|
Gdańsk | Crude oil and gas production | 62.40% (5, 7) | 81.68% |
| AB LOTOS Geonafta Group | ||||
|
Litwa, Gargżdai | Crude oil exploration and production | 49.99% (5, 8) | 49.99% |
(1) In H1 2014, Grupa LOTOS S.A. completed squeeze-out of shares in LOTOS Petrobaltic S.A. to acquire equity interests held by non-controlling shareholders (excluding shares held by the State Treasury). In H1 2014, the Company acquired 429 shares with a total value of PLN 54 thousand. As a result of the transactions completed in H1 2014, the amount of non-controlling interests decreased by PLN 83 thousand, and PLN 29 thousand was recognised as retained earnings attributable to the Parent. Expenditure on the acquisition of the shares in LOTOS Petrobaltic S.A. was PLN 54 thousand and was disclosed in the consolidated statement of cash flows under Cash flows attributable to changes in interest in subsidiaries not resulting in loss of control.
(2) In connection with the ruling of July 9th 2014 of the District Court for Katowice-Wschód in Katowice, 8th Commercial Division of the National Court, issued in an action for change of valuation of LOTOS Terminale S.A. shares acquired by Grupa LOTOS S.A. in 2011 in a squeeze-out process, Grupa LOTOS S.A. is required to pay to former shareholders of LOTOS Terminale S.A. (non-controlling interests) a total amount of PLN 2,208 thousand. As a result, the Group's retained earnings decreased by PLN 2,208 thousand. As at December 31st 2014, the amount of liabilities outstanding under the transaction was PLN 581 thousand. Expenditure incurred under the transaction in 2014, of PLN 1,627 thousand, was presented in the statement of cash flows from financing activities under Cash flows attributable to changes in interest in subsidiaries not resulting in loss of control.
(3) Liquidation proceedings with respect to LOTOS Park Technologiczny Sp. z o.o., opened by virtue of a decision of April 11th 2014, were registered under the relevant entry in the business register maintained by the District Court of Rzeszów, 12th Commercial Division of the National Court Register. The liquidation proceedings were opened to achieve one of the objectives of the 2013−2015 Efficiency and Growth Programme, which is to streamline the structure of the LOTOS Group. As at December 31st 2014, the liquidation proceedings concerning LOTOS Park Technologiczny Sp. z o.o. were completed.
(4) On October 6th 2014, a share purchase agreement was executed between Grupa LOTOS S.A. and law office Kancelaria Prawna Domański i Wspólnicy sp.k., under which Grupa LOTOS S.A. acquired 100% of shares in Infrastruktura Kolejowa Sp. z o.o. The company was excluded from consolidation because the figures reported in its financial statements as at December 31st 2014 were immaterial to fulfilling the obligation provided for in IFRS 10 Consolidated Financial Statements.
(5) The shareholding changes described in item (1) above had effect on the indirect equity interests held by the Group in the LOTOS Petrobaltic Group entities.
(6) Joint venture agreement between Grupa LOTOS S.A. and BP Europe SE on joint operations related to supply of aviation fuel through LOTOS - Air BP Polska Sp. z o.o.
(7) A special purpose vehicle established in connection with the cooperation between LOTOS Petrobaltic S.A. and CalEnergy Resources Poland Sp. z o.o. on development of the B-4 and B-6 fields.
In 2014, the change in the Group’s ownership interest in Baltic Gas spółka z ograniczoną odpowiedzialnością i wspólnicy sp. k. was attributable to payment of the PLN 10,183 thousand cash contribution by CalEnergy Resources Poland Sp. z o.o. (“CalEnergy”) in accordance with the notary deed of August 21st 2013 and increase in the agreed contributions by limited partners: CalEnergy and LOTOS Petrobaltic S.A. The increase was effected by the limited partners providing their cash contributions in the following amounts: CalEnergy - PLN 44,205 thousand (contribution increased from PLN 21,865 thousand to PLN 66,071 thousand); LOTOS Petrobaltic S.A. - PLN 348 thousand (contribution increased from PLN 52,300 thousand to PLN 52,648 thousand). As a result, the ownership interests in Baltic Gas, measured as a percentage of the amount of contributions made by individual partners to total contributions as at December 31st 2014, were as follows: Baltic Gas Sp. z o.o. (general partner): 0.001%; LOTOS Petrobaltic S.A. (limited partner): 62.403%; CalEnergy (limited partner): 37.596%. For IFRS purposes, Baltic Gas Sp. z o.o. i wspólnicy sp.k and Baltic Gas Sp. z o.o. are entities jointly controlled by the Group (equity-accounted joint arrangement under IFRS 11; see Note 2 to the consolidated financial statements for 2013).
(8) At December 31st 2014, in accordance with IFRS 11 Joint Arrangements, the interest in UAB Minijos Nafta was equity-accounted. This approach was applied retrospectively. In the approved consolidated financial statements for the year ended December 31st 2013, the company was consolidated proportionately.
The Notes to the consolidated financial statements are an integral part of the statements.
(This is a translation of a document originally issued in Polish)
