Despite the slight deterioration in the international refining environment, HELLENiQ ENERGY Holdings continues to achieve satisfactory results, mainly due to international market conditions and improved operating performance in its business activities.
Compared to the corresponding first quarter of 2022, the positive course is reflected in both the increase in sales and the increase in profitability. Sales of petroleum products stood at 3.7 million tons (+12%), increasing exports by 27%, representing 60% of the total volume sold.
The reported net profit reflects the effect of price volatility on reported results, as it amounts to €155 M. The year-on-year price difference is around €426 M, as inventory losses in the first quarter of this year due to crude oil and product price declines in refining and retail in Greece amount to €145 million, compared with €281 million in inventory valuation gains in the corresponding period last year .
Implementation of the Strategy – Vision 2025
During 2022, the company made important changes to the Group’s strategy, taking into account the changing environment and future challenges. Specifically, the priorities for the development of cleaner forms of energy were redefined, the corporate governance framework was improved, a more appropriate corporate structure was established and, finally, the new corporate identity was adopted.
Having successfully completed the first phase of these changes, the emphasis is on four pillars: (a) operational excellence, (b) portfolio development in RES and value-added storage, (c) reduction of the carbon footprint in activities oil companies, as well as (d) additional improvement in ESG issues.
In this context, an investment in carbon capture and storage (CCS) technology is being evaluated in an existing unit of the Elefsina refinery, for the production of “blue” hydrogen, for which a financing request was recently submitted to the Fund. Innovation European.
Although carbon capture and storage technology is relatively proven, the current facts (institutional framework, funding priorities at European level, availability of storage) rule out the possibility of a quick investment decision. The management of the company, however, considers that it must proceed with preparatory actions to achieve the conditions and be able to implement such a solution. On the contrary, closer to the final investment decision is the pilot investment in “green” hydrogen at the Elefsina refinery, while the biofuel production projects (HVO, SAF) at the Group refinery have entered the phase of implementation. Access to cheap green electricity plays an important role in new technologies and, in this context, the RES portfolio developed by the company, beyond any independent business logic it may have, can also act as an important pole of synergies for improve the carbon footprint of its activities.
In terms of operational optimization and improvement of competitiveness, the digital transformation program is accelerating, with investments of more than 40 million euros and significant benefits that are estimated to reach 50 million euros per year at the end of the program.
In the RES sector, after the addition of approximately 300 MW of installed capacity over the past year, the total RES capacity in operation amounts to 341 MW and additional projects in Greece and abroad are already being evaluated. Of particular importance is the development of storage solutions as well as energy management, where there may be significant possibilities for synergy with the rest of the Group’s portfolio.
Regarding the Hydrocarbons Research and Production sector, the objective is to complete as soon as possible the processing and interpretation of the two-dimensional (2D) seismic records carried out in the 2 marine parcels (West of Crete, Southwest of Crete) in collaboration with ExxonMobil, as well as 3D seismic records implemented in the Block 2, Block Ionio and Block 10 fields. Work is progressing well, but decisions should not be expected until 2023.
Normalization of crude oil prices and strong international refining margins
International crude oil and product prices continued to slow during the first quarter of 2023, with Brent averaging $81 per barrel. However, concerns remain about the dynamics of global demand and the normalization of supply compared to the corresponding period in 2022, where prices were affected upwards by the Russian invasion of Ukraine.
Refining margins, during the first quarter of 2023, were significantly higher compared to the corresponding period of 2022. This was mainly contributed by stockpiling before the implementation of sanctions on exports of products from Russia on February 5, 2023 , but also reduced refining capacity in Europe due to strikes at French refineries. Specifically, FCC and Hydrocracking international benchmark margins were set at $10.7/bbl and $14.1/bbl respectively in the first quarter of 2023, compared to $3.6/bbl and $6.7/bbl in the first quarter. quarter of 2022.
Improving the motor fuel market
As a positive result, there was a 5% increase in the demand for motor fuels, mainly as a result of greater economic activity and the extension of the tourist season. Consequently, the demand for aviation fuel increased further, by 25%, due to increased flight activity, while marine fuel consumption experienced a slight decrease of 2%. Despite past performance, mild weather conditions led to lower heating oil needs, with overall fuel sales at lower levels than in the first quarter of 2022.
Balance sheet and investment costs
The profitability achieved in the first quarter of 2023, combined with the normalization of working capital needs, contributed to the strengthening of the balance sheet. Net debt decreased in the first quarter of 2023 by €500 million compared to the end of 2022 and by €0.900 million compared to the end of the first quarter of 2022, and the leverage ratio (net debt over total funds ) was reduced to 34 %
Investment costs amounted to 40 million euros, reduced compared to the same period last year which included the extensive maintenance program at the Elefsina refinery.
the siamese message
Commenting on the results, the CEO of HELLENiQ ENERGY Holdings AE, andreas siamisiisnoted: “One year after the invasion of Ukraine, the balance in the international energy market has been redefined with some of the impacts reduced, but with a significantly different perception of the industry’s strategy and priorities.
Aiming for a more environmentally neutral energy market remains a priority and of course determines our current and future investments in RES, energy storage, as well as reducing the carbon footprint of the energy products we produce. At the same time, however, the recent experiences of the energy crisis, as well as the technical problems that begin to manifest themselves with the increase in RES, once again highlighted more emphatically the need for adequate long-term energy planning. . security, both in terms of accessibility and cost of energy products, as well as in the type of investments required.
Our strategy, as outlined in Vision 2025, takes this into account and, having successfully completed the first phase of the transformation, we are proceeding with development in New Energy, with increasing emphasis on development outside of Greece and in electricity storage solutions. as well as in the evaluation and implementation of investments related to the energy transition of the refineries and the substantial improvement of our environmental footprint.
At the same time, we are focused on the proper functioning and efficiency of all our activities and, in this context, the results of the 1st Quarter are particularly encouraging, since there is an increase in production, exports and profitability compared to the last year. High operating profitability is highly dependent on strong refining margins for the Mediterranean region and the operational flexibility of refineries that can optimize our results. Consequently, the areas in which we can influence our other activities as well, although they determine the overall results relatively less (petrol station networks, external activities, RES) show continuous improvement.
The forecast for the next period is for the international market to move to lower margin levels, but the estimates for the Greek market remain positive, with improved demand as we enter the tourist season, but also due to higher investments.” .
REFINING, SUPPLY AND TRADE
In the first quarter of 2023, comparable EBITDA profits from the Refining, Supply and Trading segment reached €366 million, driven by strong international refining margins, outperformance of the Group’s refining system and higher volumes of sales, with a significantly improved export share.
Product production reached 3.6 million tons, significantly higher (+29%) compared to the corresponding period of 2022, when an extensive maintenance program was implemented at the Elefsina refinery.
PETROCHEMICAL
Comparable petrochemicals EBITDA in the first quarter of 2023 was €15 million, a year-on-year decrease due to lower polypropylene margins, partially offset by a 9% increase in sales volumes.
MARKETING
The Domestic Trade sector registered a low sales volume in the first quarter of 2023 (-7%), while, excluding sales of heating oil, it registered an increase of 2%. Regulatory restrictions on gross margin, lower inventory valuation due to falling prices and higher transportation costs negatively affected profitability.
The International Trade segment in the first quarter of 2023 posted higher sales volumes (+9%), with like-for-like EBITDA gains improving 33% to €17 million, with higher margins and a better contribution from Bulgaria and the Republic from North Macedonia.
BEEF
Higher installed capacity from renewable sources (341 MW) led to higher electricity production, with comparable EBITDA gains reaching €10 million in the first quarter of 2023.
shares
The contribution of the DEPA companies to the Group’s consolidated net profit for the first quarter of 2023 amounts to 9 million euros.
Elpedison’s EBITDA earnings for the first quarter of 2023 were €60 million, supported by high unit availability, operational flexibility and the exploitation of natural gas business opportunities.