Financial results influenced by the volatility in the oil and gas market, in the first quarter of 2020

The first quarter of 2020 was marked by sharp declines in the oil and gas market, driven by restrictive measures imposed with the onset of the COVID-19 pandemic. Rompetrol Rafinare, member company of the KMG International Group, recorded financial results affected by the significant decrease in gross refining margins, halved compared to the previous year.

The consolidated financial result was also affected by the unfavorable weather conditions recorded in the first two months of 2020, which led to bottlenecks in the supply of raw materials. Then, in March, the Petromidia refinery stoped operations for scheduled turnaround works.

At the same time, the depreciation of the national currency against the euro and the dollar has put additional pressure on refining margins.

Against the background of the current situation, the company has taken measures to prevent and protect employees, collaborators and customers, by adapting the overall strategy to the global context.
 

_{Note: The consolidated financial statement of Rompetrol Rafinare include the results of Rompetrol Rafinare S.A. and those of the subsidiaries Rompetrol Quality Control S.R.L., Rom Oil S.A., Rompetrol Downstream S.R.L., Rompetrol Logistics S.R.L. Rompetrol Gas S.R.L and Rompetrol Petrochemicals S.R.L.}
 

Rompetrol Rafinare, member company of the KMG International Group, successfully completed, between March 13 and April 28, the turnaround of the Petromidia refinery, an operation aimed at increasing the level of safety in the operation of the facilities and creating a stable environment for future development projects of the raw material processing activities.

Amid the installations shutdowns in the first quarter, Rompetrol Rafinare recorded a gross turnover of 929 million dollars in the first three months of 2020. In addition, the operational profit (EBITDA) was strongly affected by the high volatility of the oil and gas market environment.

At the same time, the company recorded a negative net result of 87.8 million dollars in the first quarter of the year, down from the negative net result of the same period last year - 14 million dollars.

Rompetrol Rafinare continued to be a major contributor to Romania's state budget, paying over 271 million dollars in the first quarter of 2020.

The main shareholders of Rompetrol Rafinare SA are KMG International (54.63% - directly and indirectly) and the Romanian State through the Ministry of Economy, Energy and Business Environment (44.7%).

Refining segment*

_{Note: The refining segment includes the results of Rompetrol Rafinare SA referring to the activities of refineries Petromidia and Vega. Rompetrol Rafinare calculates the gross refining margin as follows – (Oil product sales – Raw material cost)/Volume of sales. The net refining margin is the operational profit (EBITDA) divided to the sales volume.}

The refining segment managed to achieve good operational performances for the main technological parameters, as follows: white product yield - 86.3%, mechanical availability - 97.7%, technological loss - 0.9%wt and energy intensity index - 106.8%.

In the first quarter of the year, a total of 1.24 million tons of raw materials were processed at the Petromidia refinery. During the same period, the degree of utilization of the refining capacity decreased by 23.5% compared to Q1 2019, to the indicator of 73.5%, due to bad weather conditions, respectively of the interruption of the operational processes for the general turnaround.

Regarding the Vega Ploieşti refinery, the most long-standing refinery in Romania and the only domestic producer of bitumen and hexane, the unit processed over 72,000 tons of raw materials, slightly lower than in Q1 2019, when the refinery processed 79,000 tons.

The Ploieşti unit managed to achieve good performances on indicators such as mechanical availability (98.7%), energy consumption (3.18 GJ / t) and technological loss (0.76%). Vega Ploieşti refinery operates in perfect synergy with the Petromidia Năvodari refinery, which fully provides the raw materials / semi-finished products necessary to obtain special products with a high added value.

The gross turnover of the refining segment reached over 760 million dollars in Q1 2020, decreasing by 23% compared to Q1 2019. The variation compared to the first quarter of 2019 was mainly influenced by the decrease in international market quotations of oil and gas on petroleum products, along with the decrease in the volume of products sold in external markets.

The operational profit (EBITDA) and net result of the refining segment were mainly influenced by refining margins, which decreased in the first quarter of 2020 to USD 21.9 / t, given the unfavorable market environment.
 

Petrochemical segment*

_{Note: the petrochemicals segment includes the petrochemicals activity of Rompetrol Rafinare SA and Rompetrol Petrochemicals SRL}

In the first quarter of 2020, the total production of polymers of the petrochemical segment increased by 13%, to a total of 32.7 kt, compared to 29 kt in Q1 2019, an evolution due to the operation program of the Low Density Polyethylene Plant (LDPE).

The results of the petrochemical division continued to be affected by market pressure on margins. The petrochemical segment is the only national producer of polypropylene and polyethylene, constantly managing to increase its market share in the secondary product categories as well.

The Petrochemical Division of Rompetrol Rafinare is also the sole manufacturer of the RSB 25 sort, which can also be used to produce the necessary protective equipment for the Health System.

Its dynamic development strategy ensures the company a competitive position on the domestic market, but also on the regional one - the area of the Black Sea and the Mediterranean, Central and Eastern Europe, aiming to maintain the competitive advantage once the market stabilizes.
 

Distribution segment*

_{Note: The distribution segment includes the results of subsidiaries Rom Oil, Rompetrol Downstream, Rompetrol Quality Control, Rompetrol Logistics and Rompetrol Gas}

In the context of an accelerated decrease of fuel sales in March, the company managed to maintain its market share in the retail and wholesale segments. This was maintained because the effects of the restrictive measures, imposed with the declaration of the pandemic, were felt only in the second half of March.

Thus, fuel sales increased in the first two months of the year compared to January and February 2019, but as a result of the declaration of the pandemic with the new coronavirus, sales in the second half of March 2020 halved, after the decree of the state of emergency in Romania.

Rompetrol Downstream continued, in the first three months of the year, the program to expand the fuel distribution. Thus, at the end of March 2020, the company reached a network of 988 sales points (network of own stations, partner stations, mobile stations: express, internal bases of 9 and 20 cubic meters).

_{* The consolidated financial statement of Rompetrol Rafinare include the results of Rompetrol Rafinare S.A. and those of the subsidiaries Rompetrol Quality Control S.R.L., Rom Oil S.A., Rompetrol Downstream S.R.L., Rompetrol Logistics S.R.L. Rompetrol Gas S.R.L and Rompetrol Petrochemicals S.R.L.}

_{*The consolidated results presented are preliminary and unaudited, and the reporting was performed in compliance with the International Financial Reporting Standards (IFRS).}
 

Communication and Public Relations Department

KMG International