Energy market turmoil driven by the geopolitical risks and supply issues continues to keep the hydrocarbon prices at elevated levels, with Brent prices above 100 dollars per barrel and CEGH gas price fluctuating, but shortly exceeding even 200 euros/MWh during Q3 2022. In such environment, entire oil and gas industry delivers strong results.
INA Group CCS EBITDA excl. special items in first nine months 2022 amounted to more than 620 million euros, while net profit exceeded 358 million euros, which is 152 % higher compared to the same period last year.
Results are stronger in all segments with Exploration and Production naturally being the main cash generator, mainly due to the strong environment. Exploration and Production revenues amounted to 716 million euros with EBITDA of 517 million euros. Natural decline of production continues, but the effect of ongoing offshore drilling campaign is already visible in production volumes.
Ongoing investment cycle in Refining and Marketing including Consumer services and Retail segment caused negative cash flow although the operating results improved. Various regulatory restrictions in Retail had a negative impact on the result but on the other side the refining margins improved leading to better overall results with CCS EBITDA excluding special items of 172 million euros.
Investment activities continue to be on high levels, throughout the segments, more than doubling compared to first nine months 2021.
Refining and Marketing, with the Residue Upgrade Project remain the biggest investment, but the ongoing offshore drilling campaign is also a significant development project, with the effect of increase production already showing.
Despite the strong operative results, operating cash flow of the company is lower compared to last year, due to major investments and large financing needs for the working capital.
President of INA’s Management Board Peter Ratatics said that the third quarter of 2022 brought continuation of worldwide energy market volatility, with gas prices oscillating and oil price at continued high level. Questionable security of supply in some countries, caused by the global turmoil, alongside with elevated price level led to numerous regulatory interventions throughout the world. In such environment INA’s result stayed strong, primarily due to the Exploration and Production, the strongest cash generator in the conditions of high hydrocarbon prices. Ongoing offshore drilling campaign already brought some results with two new wells put into production, although further development is needed and underway in order to mitigate the natural production decline, something expected with the mature portfolio of INA.
Compared to the same period last year, refining margins are greatly improved, which led to improved Refining and Marketing operations, despite the fact that increased energy prices also burden their result. Captive market sales also increased, with the results under pressure with the various limitations on margins. Nevertheless, the safe supply of the market remains INA’s priority. Excellent tourist season and consumption assisted the growth of Retail volumes in fuel, with third quarter amounting to more than 40 % of volumes in the first nine months 2022. Alongside with fuel, a non fuel growth continued due to expansion of offer and improved sales.
Although the external environment of high hydrocarbon prices enabled us to increase our income, it is important to emphasize that a large part of INA’s profit is returned to investments, so the period of strong investments continued. Our CAPEX more than doubled compared to the first nine months of 2021. The Rijeka Refinery upgrade project continues as INA’s largest investment in history, the goal of which is to ensure the long term profitability of INA’s refining, on top of already ensured security of supply. The aforementioned offshore drilling campaigns will ensure an increase in natural gas production.
It is ungrateful to predict what will the future bring since the volatile markets, the regulatory measures that are hard to foresee, the rising inflation and probable recession bring a higher level of uncertainty. Therefore, INA will continue to continuously improve its operations to strengthen its position for the years ahead.