Orlen SA
PSE:PKN
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
297
423
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CZK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Dear, ladies and gentlemen, welcome to the Consolidated Financial Results of PKN ORLEN Q3 2020 Conference Call. At our customers' request, this conference will be recorded. [Operator Instructions] In the meantime, it is my pleasure to return the floor to Mr. Konrad Wlodarczyk. Please go ahead, sir.
Thank you, operator. Good morning, ladies and gentlemen. Welcome to the conference call regarding PKN ORLEN consolidated financial results for the third quarter 2020. The presentation that was e-mailed to you and is available on our website will be delivered by me and Michal Perlik, Executive Director for Finance Management.
And as usual, after the presentation, there will be a Q&A session. So -- during which several directors from PKN ORLEN will be ready to answer your questions. With no further delay, we can kick off and go firstly to Slide #3. So key facts and figures.
In the third quarter, PKN ORLEN achieved PLN 2 billion EBITDA LIFO. And we perceive this result as a very strong one, taking into account current challenging macro environment. Impact of one-offs, I mean, net realizable value and impairment of assets was not material this quarter. So clean results are presented on the slide number 30 in the Supportive section.
We would like also to underline that we are close to finalize our new strategy for the next 10 years, which will be presented in a few weeks' time. Coming back to third quarter, as I mentioned before, macro environment was extremely weak.
Our model downstream margin decreased by 57% year-on-year due to lower fuel consumption and strong pressure on refining margins. Refining margins, including B/UD were on the lowest level in the history. Sales volumes decreased by 8% year-on-year to the level of 10.5 million tonnes, which is still a result of market shock caused by COVID.
But it's worth to mention that sales volumes increased more than 20% quarter-on-quarter. That was the trigger to increase crude oil throughput from 6.2 million tonnes in the second quarter to 8.2 million tonnes in the third quarter, which is equivalent of 93% of capacity utilization.
We maintained our financial strength, what was confirmed by Moody's agency by rising the rating outlook from negative to positive. So in the first quarter, we generated PLN 2.2 billion cash flow from operations. We realized CapEx at the level of PLN 2 billion. Net debt at the end of third quarter amounted to PLN 11.9 billion, which is 28.4% financial gearing.
We also secured future financing by signing a revolving credit facility agreement up to EUR 1.75 billion. And for your information, the whole amount is available to utilize. Additionally, as every year, we pay the dividends to our shareholders.
And it's worth also to underline that in these difficult times we continued M&A processes that had already started. We were involved in talks with potential partners to meet remedies negotiated with European Commission in the process of taking over LOTOS Group.
We have announced tender offer for remaining 20% shares of ENERGA. And we are working on concentration application to the European Commission. And we are simultaneously carrying out due diligence process in PGNiG. And after the vertical on the agreement of proceedings becomes final, we plan to acquire 65% of RUCH shares.
We do confirm our CapEx plan for this year, PLN 9 billion, including PLN 7.7 billion of PKN ORLEN. Of course, we have some flexibility in the CapEx, as we've mentioned before, so circa 90% of CapEx is contracted for this year, so around 10% could be shifted for the next year.
In the third quarter, we have started construction of Visbreaking installation and modernization of HDS unit and hydro cracking in Plock. We continued work related to expansion of fertilizers production. In Anwil, we have submitted environmental report, and we finalized the process of selection and designer for offshore wind farm on the Baltic Sea.
Additionally, we signed a letter of intent with PGNiG regarding potential cooperation in the construction of CCGT plant in Ostroleka and the development of biogas plants. We also started the process of selecting a contractor for hydrogen hub in Wloclawek.
In retail, we have launched another drive-through station in Poland, and we are also planning to build 2 hydrogen stations in the Czech Republic still this year. As a proof of choosing a right direction of growth, I mean, our plans to reduce CO2 emission by 2030 as well as our aspiration to achieve emission neutrality in 2050, PKN ORLEN was appreciated by Sustained Analytics agency, which increased ESG rating for PKN ORLEN. We took fifth place out of 86 companies from oil and gas, refining and marketing sector. And we were also awarded the Best Annual Report again.
Now I will go into the details of third quarter results starting from the macro environment on Slide #5. Even though I've already mentioned it twice, I will say it again, that third quarter was the worst period in PKN ORLEN history in terms of macro environment.
In the third quarter, model downstream margin decreased by USD 7.3 per barrel compared to the previous year. And this was mainly the effect of significant decline in the refining margin, this lower demand as a COVID impact and lower B/U differential.
As a result of crude oil prices decreased by USD 19 per barrel, we recorded lower cost of our own consumption. Diesel and gasoline cracks decreased by 71% and 49%, respectively, as increase in cracks on heavy fuel oil by 39%. Operating results were supported by weaker Polish zloty versus euro, partially limited by stronger Polish zloty versus U.S. dollar.
Next slide, Slide #6 shows the GDP and fuel consumption. In the third quarter, we expect a significant drop in GDP in all domestic markets year-on-year, which translates into lower fuel consumption of diesel. We recorded a significant increase in fuel sales compared to second quarter that I mentioned. However, the dynamics are still negative comparing year-on-year.
Gasoline consumption, mainly driven by retail customers is growing in all countries, except Germany. And compared to other countries, similarly as in the second quarter, Lithuania presents surprisingly well, where diesel consumption is slightly higher than last year. And the gasoline consumption recorded double-digit growth.
Now I will present financial data and operating results for the third quarter. So Slide #8. In the third quarter 2020, we recorded decrease in revenues by 18%, mainly due to lower quotations of refining and petrochemical products resulting from crude oil price decrease and lower sales volumes.
We achieved PLN 2 billion EBITDA LIFO, so lower results by PLN 1.2 billion year-on-year, mainly as a result of negative impact of macro deterioration, lower sales volumes, higher fixed cost and labor costs, usage of historical layers of inventories, partially limited by higher trade margins in wholesale and retail, and consolidation of ENERGA Group results as well as inventory revaluation.
Negative impact of net realizable value amounted to minus PLN 66 million. As a result of crude oil price increase in the first quarter, we recognized positive LIFO effect in the amount of PLN 300 million, which caused an increase of reported EBITDA to the level of PLN 2.2 billion.
Net financials, minus PLN 200 million due to negative impact of net FX differences, net settlements of -- and valuation of derivative financial instruments and interest costs. So taking all into account in the third quarter, we achieved PLN 688 million net profit.
Next slide, Slide #9. So on this slide, we present a split of EBITDA LIFO by segment, refining, minus [ PLN 400 million ], so decreased by PLN 1.5 billion year-on-year due to negative macro effect. And lower sales volumes limited by positive impact of higher wholesale rates and margins and inventory devaluation.
Petchem, PLN 500 million, so decreased by PLN 219 million year-on-year, mainly due to negative effect of macro deterioration. Energy over PLN 1 billion increased by PLN 500 million year-on-year, mainly due to positive impact of consolidation of ENERGA Group results. Retail, also over PLN 1 billion EBITDA LIFO, so increased by more than PLN 100 million year-on-year mainly due to positive effect of higher fuel margins that were limited partially by lower sales volumes and lower nonfuel margins.
Upstream, PLN 44 million, so decreased by PLN 41 million year-on-year due to negative macro effects and lower sales volumes and corporate functions. So we recorded higher cost by minus PLN 18 million year-on-year, majority of this is a result of donations given for the fight against coronavirus.
So now let's go into the details. Refining segment, Slide #10. Refining was in red in the third quarter, generating minus PLN 370 million operating results, which was lower by PLN 1.5 billion year-on-year. As you can see at the bottom of the slide, the main reason for this was negative macro effect of minus PLN 1.5 billion as a result of lower cracks on light and middle distillate and lower B/U differential by USD 1.1 per barrel, and the strengthening of Polish zloty versus U.S. dollar.
These negative effects were partially limited by positive impact of higher cracks on heavy refining fractions and lower cost of internal usage due to crude oil price dropped by USD 19 per barrel. Volumes effect was negative as well at the level of PLN 200 million. We recorded sales decrease in the refining segment by minus 12% due to lower sales of gasoline, diesel, LPG, jet and heavy fuel oil.
Others mainly include positive effects of net realizable value year-on-year. Higher wholesale margins and -- had negative effect of higher operating cost and usage of historical layers of inventories.
Slide #11. This slide shows operating data of refining segment. In third quarter, you see that PKN ORLEN processed 8.2 million tonnes of crude oil, which is minus 0.8 million less than in the third quarter 2019 as a result of lower utilization in the Czech Republic and Lithuanian refineries due to significant impact of COVID on the market situation.
In Unipetrol, utilization was lower by 9 percentage point year-on-year due to lower demand for middle displays and maintenance shutdowns of polyethylene unit free -- polyethylene unit in Unipetrol and PVC in Spolana. In ORLEN Lietuva, utilization was lower by 20 percentage points as a result of reduced throughput due to unfavorable macro situation and in plus throughput was on the comparable level year-on-year.
Going into split market by marker, in Poland, total sales of refining products dropped by 10% year-on-year, including lower sales of diesel by 6%, jet fuel minus 57%, and LPG, almost minus 20%. Comparable sales of gasoline year-on-year, we've had positive dynamics in bitumen sales by 12% year-on-year.
In ORLEN Lietuva, volumes dropped by 15% as a result of lower gasoline sales by 5%, jet minus 62%, diesel minus 2% at higher sales of bitumen by 12%. In the Czech Republic, also decreased by minus 10% as a result of lower sales of LPG, minus 56%, diesel minus 9%, jet almost minus 95% at comparable sales of gasoline.
Slide #12. In third quarter, petchem segment delivered over PLN 500 million of EBITDA LIFO, which is lower by 30% year-on-year. So the most important factor responsible for the drop was macro in the amount of minus PLN 230 million, of which margin drop effect was even over minus PLN 280 million.
Negative macro impact year-on-year was due to decrease in margins on olefins and polypropylene as a result and result of hedging transaction. That was partially compensated by higher margins on polyethylene and PVC and positive impact of Polish zloty weakening versus euro.
We recorded petchem sales volumes at a comparable level year-on-year. So that was a result of higher sales of fertilizers 12%, PVC 9%, and olefins by 3%, limited by lower sales of PTA, minus 14%, polyolefins minus 5%.
So if we look country by country, we see higher sales in Poland by 7%, in Lithuania by more than 100%, while in the Czech Republic, sales was lower by minus 16%, mainly due to decline in demand from automotive and construction sectors, as well as maintenance shutdown. For your information, Anwil and PTA sales generated around 30% of total petchem segment results.
Next slide, Slide #13, operational data in Petrochemicals segment. So we may say that in the third quarter, COVID's impact on petchem was negligible. In PKN ORLEN, we recorded increase in capacity utilization year-on-year due to lack of maintenance shutdowns in BOP and Anwil installations, which they had a year ago.
We also recorded higher capacity utilization in Unipetrol. So even despite the maintenance shutdowns of PE3 and PVC installations, ORLEN Lietuva installations operated without any significant turnarounds. Installations in Wloclawek were working on higher utilization fertilizers, higher by 17 percentage points, PVC by 10 percentage points as well as the production of olefins in Plock was higher by 9 percentage points and Unipetrol by 3 percentage points.
Next slide, Slide #14. Energy segment. Energy segment generated in Q3 over PLN 1 billion EBITDA LIFO, which is 2x higher results compared to previous year, mainly due to consolidation of ENERGA Group results in the amount of PLN 486 million.
Besides, we observed positive macro effect due to higher decrease in natural gas prices comparing to electricity prices at lower sales volumes of electricity. That was the effect of lower demand from the economy for energy due to coronavirus. Other includes consolidation of ENERGA Group results, which is described in the supporting section, Slide #37.
So now let's move to the selected data of energy segment, so Slide #15. This slide confirms that we are focused on developing low and zero-emission energy sources in Q3. ORLEN Group, including acquired ENERGA Group, produced less electricity by 3% year-on-year due to lower demand from the economy and amounted to 2.8 terawatt hours.
Around 75% of energy production comes from res and gas-fired units. Sales volumes amounted to 6.7 terawatt hours and distribution to 5.4 terawatt hours. As a result of consolidation, the group's current installed capacity is more than 3.2 gigawatts electrical, of which more than 1.8 gigawatts in ORLEN Group and more than 1.4 in an ENERGA. In Q3, gas consumption in Energy segment of PKN ORLEN was 0.43 BCM and CO2 emission amounted to 1.6 million tonnes.
Slide #16, retail. Retail generated a record high result, over PLN 1 billion EBITDA LIFO, which is higher by 12% year-on-year. We recorded lower sales volumes by 4% at higher gasoline sales and drop in diesel volumes compared to previous year. We also [ offset ] increase in retail margins, mainly in German and Polish markets at a drop in Czech market and comparable margins on the Lithuanian market.
Non-fuel margin was lower year-on-year on Polish market, especially in hot snacks and beverages as comparable margins on other markets. We expand our fuel stations network to increase availability of alternative fuels. So you see that currently, we have 182 points with alternative fuels, which means 2x more than last year.
It's also worth to remind you that we constantly support Polish economy through cooperation with Polish producers. So currently, around 85% of products available at ORLEN fuel stations were produced in Poland domestically.
Slide #17 shows operating data of retail segment. At the end of Q3, we were running 2,840 fuel stations, of which 75% were equipped with nonfuel concept Stop Cafe. Number of fuel stations increased by 33 year-on-year. We opened new stations on all markets we operate in. Due to drop in fuel consumption as a result of COVID, retail recorded sales volumes decreased by 4% year-on-year. Lower sales was in German and Polish markets.
Market share increased in Czech, Slovak and Polish market at comparable level in Germany and Lithuania. It's worth to highlight also further dynamic growth on non-fuel offer, another 19 locations were opened in third quarter. And at the end of the quarter, we were running 2,181 coffee corners, including almost 600 convenience stores, which means increased by 73 year-on-year.
And of course, we do not forget about electromobility that I've mentioned on the previous slide. We just connected 8 new fast chargers to network and launching next ones is planned for the near future. At the end of Q3, our clients could use almost 140 chargers, more than 100 in Poland, 21 in Czech Republic and 7 in Germany, which means higher by almost 80 year-on-year.
We have also 2 hydrogen stations located in Germany. More than 40 stations of CNG in the Czech Republic, which gives us, in total, 182 locations with alternative fuels.
Slide #18, upstream. Upstream delivered PLN 44 million EBITDA LIFO, which is almost 50% lower year-on-year. So this is due to negative macro impact as a result of crude oil and NGL prices decrease at higher prices of gas. And the result on transactions aimed at cash flow hedging.
Moreover, we recorded minus 2% sales volumes decreased as a result of drop in quarterly average production to [16,800 BOE] per day, which is the outcome of a lower average production of 800 BOE per day in Canada and lower by 100 BOE per day in Poland.
Slide #19. Some details regarding upstream segment. We have circa 197 million BOE (2P) reserves of crude oil and gas. So this is the data at the end of 2019. Average production in the third quarter reached 16,800 BOE per day. In Q3, CapEx on upstream amounted to almost PLN 50 million and was realized in split 2/3 in Poland and 1/3 in Canada.
When it comes to operating activities realized in Q3 in Poland, among others, we continue to work on the development of deposits on Miocen, Edge and Plotki projects. Drilling and short-term production tests were carried out in a horizontal well as a part of Sieraków project that was carried out, the acquisition of 3D seismic data in Koczala Edge projects, and it was realized the processing of seismic data in Edge, Plotki and Karpaty projects.
In Canada, our CapEx program in Q3 remained at reduced level due to only moderate strengthening of the price of liquid hydrocarbons. Works were commenced aimed at fracking 2 wells in the Kakwa area. And if we were to underline that pro-ecological activities are carried out to reduce greenhouse emissions by limiting flaring and counteracting methane emissions.
Now I hand over to Michal to give you more color on cash flow and financial position. So Michal, floor is yours.
Thank you, Konrad. Good morning, everybody. Let's move to Slide #21. In third quarter, we generated PLN 2.2 billion cash flows from operating activities. EBITDA excluding LIFO effect was PLN 2.3 billion. Working capital increased by PLN 600 million, mainly due to increase in receivables by close to PLN 1 billion. Receivables increase was driven mainly by sites increase.
Short comment here: we have not recorded any significant changes in overdue payments over the last quarters. Also, we have not recorded an extraordinary number of requests from our corporate clients for expansion of payment periods, so increase of receivables is driven by a sales increase in terms of volumes. We have also recorded increase of payables, mainly related to VAT and excise tax payables and also payables for gas and biofuels.
Position others is related mainly to change in provisions for CO2 allowances and change in intercontinental exchange deposits. CapEx was PLN 2 billion in third quarter. Net outflow from investment amounted to PLN 2.3 billion. Over the last 9 months, our net debt was increased by PLN 9.5 billion. It was predominantly related to acquisition of ENERGA Group and consolidation of its debt.
Over this period, we have decreased working capital by PLN 3.1 billion, mainly in second quarter, due to massive drop of crude oil and product prices at the beginning of pandemic period. Total CapEx for 9 months amounted to PLN 5.5 billion. We also paid PLN 0.4 billion dividend in third quarter.
Now moving to Slide #22. We ended third quarter with PLN 11.9 billion of net debt. Gearing increased to 28.4%, which is still within the strategic target of 30%. We have not recorded any substantial change in the debt -- structure or debt maturity over the last 3 months.
We perceive our liquidity position as a strong one in July. As Konrad has mentioned already, we refinanced our revolving credit facility of PLN 1.75 billion in 3 years, plus 1, plus 1 formula. At the moment the whole facility is available, no drawings were made over the last few weeks.
By the end of this year, we also plan to issue 5-year bonds with a value up to PLN 1 billion as part of our current domestic bond issue program with a limit of PLN 4 billion.
Following our zero-emission strategy, which we released in September this year, our intention is to implement ESG elements to this bond issue. The issue would be, of course, directed to institutional investors through a public offer. And certainly, the final decision on the issue will be subject to other credit debt market conditions.
In our new strategy plan to be released this year, we will present our plans for refinancing our euro-denominated bond issues. So that's all from my side. Thank you, and I hand over to Konrad.
Thank you, Michal. So now Slide #23, CapEx. CapEx for this year, as I've mentioned at the beginning, is planned to PLN 9 billion, out of which PLN 7.7 billion, ORLEN Group and PLN 1.3 billion, ENERGA Group.
After 3 quarters realized CapEx amounted to PLN 5.5 billion, of which PLN 0.7 billion in ENERGA Group. The largest share was in refining segment, PLN 2 billion; petchem, 1.2 billion; on energy segment, we spent PLN 1 billion; on retail, PLN 0.8 billion; and almost PLN 300 million in upstream.
Main growth projects realized in Q3 were in the refining, construction of Visbreaking unit in Plock and construction of propylene glycol in Trzebinia; in petrochemicals, construction of units under petrochemical program development and extension of fertilizers production in Anwil; energy, preparation for construction of offshore wind farm on the Baltic Sea and modernization of TG1 turbine set in our CHP power plant in Plock and also projects in ENERGA Group focused on production and distribution.
In retail, we opened 14 new fuel stations, closed 5, modernized 2, and we opened 19 Stop Cafe locations, including convenience stores.
Last section shows current macro environment, so Slide #25 and 26. In Q4, downstream margin increased by USD 0.5 per barrel to the level almost USD 60 per barrel as a result of increasing refining margin, higher petrochemical margin. Crude oil price decreased by minus USD 2 per barrel quarter-on-quarter, average USD 41, so mainly as a result of concerns about the decline in demand for crude oil, so global increase in COVID cases and implementation of additional restrictions in many European countries.
Plant reopen of oil production on Sharara oil field in Libya, so total capacity circa 300,000 BOE per day. Higher oil production by OPEC in September, so increased by 160,000 barrels per day versus August.
The scale of the decline was limited by data on crude oil import growth in China; in September, by 2% month-on-month drop in U.S. crude oil inventories to the level of 489 million barrels; lower production in the Gulf of Mexico, by 1.7 million barrels per day due to hurricanes. So this is 15% of the total American oil production. Lower oil production from Norwegian oil field by 330,000, so 8% of Norwegian production due to strikes.
Diesel cracks decreased 15% quarter-on-quarter. Average is USD 28 per tonne, mainly due to higher supply of diesel in Europe and expected higher imports from Russia. Gasoline cracks increased by almost 20% quarter-on-quarter. Average is USD 93 per tonne, mainly due to higher export of European gasoline to West Africa. Lower inventories in U.S. and lower gasoline supply due to closure of refineries in Gulf of Mexico.
HSFO cracks increased by 14% quarter-on-quarter. Average is minus 74%, so this is mainly due to higher demand for HSFO from West Africa, Red Sea region, Saudi Arabia and U.S. as well as lower inventories in ARA.
On the Slide #26, we see B/U differential and petchem margins. So B/U diff increased by USD 0.10 per barrel quarter-on-quarter. Average is 0, so this is mainly due to higher competitiveness of alternative types of crude oil for Ural. Currently, B/U differential is in red due to high interest for Ural in Baltic ports in October.
Petchem margin, on the comparable level, quarter-on-quarter, slight decrease EUR 3 per tonne. This is mainly due to lower feedstock costs like naphtha and [indiscernible] as a result of lower crude oil price quarter-on-quarter.
Last slide, Slide#27, shows our expectation for macro. So in terms of Brent crude oil, we expect the price to remain in the range USD 40, USD 50 per barrel until the end of 2021. So on one hand, increase in crude oil price over USD 40 per barrel cause increase in oil production, but also it weakens OPEC willingness to reduce production. And increased production at stable demand definitely will lead to higher oil stocks and lower prices.
In terms of refining margins, refining industry must adjust to the lower demand definitely. So this is similarly to those adjustments that we observed on the oil market. On the refining market, there was a reduction in supply, but processing capacity did not decrease, yes.
So refining margins may be under the pressure until global production capacity will be reduced by, roughly speaking, 3 million barrels per day, which may take, from our point of view, several quarters. And sustainable restructuring of refining industry seems to be inevitable. And biofuels and integration with petrochemicals should gain in importance.
Petchem margin. Petchem should remain circa EUR 800 per tonne. Petrochemicals definitely depends on the economic activity, which is sharply declined. However, in Europe, which is an importer of many base petrochemicals, opportunities for local production opened due to drop in imports. On the demand side, we expect a decrease in demand for fuels as a result of the second wave of COVID. In terms of regulations, nothing has changed compared to the previous quarter.
So that's all from my side. Thank you very much for the attention. And we are ready to take your questions.
[Operator Instructions] And our first question comes in from Ekaterina Smyk of Bank of America.
Congratulations on strong results. I have a couple of questions. First one is on your outlook in the retail segment. I mean, retail margins were, obviously, strong in the third quarter. You reached record result in the segment. What's the dynamic you are currently absorbing and maybe your outlook for the fourth quarter?
And similarly, in terms of wholesale paid margins, you mentioned that those were higher year-over-year in the third quarter and supported your refining performance when the core margin was a record low. Do you still see this support from trade margins so far in the fourth quarter? And -- I mean, unless we see a significant upside in oil prices, do you expect this level of margins to maintain?
And the second question with respect to your M&A. Appreciate as much details you can disclose, but do you have an understanding of when you can finalize the terms and move to the final stages? And a related issue. Do we understand correctly that the -- that we should not expect an update going through strategy from you before all the M&A deals are finalized?
Okay. Konrad Wlodarczyk speaking. So maybe I will start from the first question. So you were asking about retail margins and IP spot. So we may say that in terms of retail margins, retail margins came back to the normalized level before lockdown in third quarter. So in Q4, in Poland, margins are higher by 60% year-on-year; in Germany, by 70% year-on-year at comparable margins on the Czech Republic. So the margins in retail are still very healthy.
In terms of IP spots, so trading margins in wholesale. So beside the fact that we observed the drop of IP spots on gasoline from record high levels that we recorded in the third quarter, margins on gasoline are still 30% higher comparing to the last year. Margins on diesel increased comparing to the last year by 5%.
So in -- if we compare year-on-year, this is the increase by 15%. So the level of margins, IP spot, this is the effect of deficit on the market of gasoline and an excess of the diesel. So currently, both margins, trading margins in retail and wholesale are on a very healthy level. And the second question was about the M&A. So --.
Okay. First of all on the M&A department. With regard to days of M&A activities, I understand that you would like to understand our schedule. And what we can disclose at this moment regarding our transactions.
Referring to LOTOS Group, we expect that we will be able to take over the company within 1.5 years since the decision of the European Commission [indiscernible] since 14th July. With regard to PGNiG, we would like to finalize both transactions together. That will be our preferred approach. So this means that 1.5 years that for -- with both transactions.
Clear. And with respect to the long-term strategy, we should not expect that one before the deal is finalized, right?
No. We -- as Konrad said during the presentation, that was our strategy here. We should expect the strategy update in a few weeks from now.
Yes. And it will be a long-term strategy. First time in the history, we will show the strategy covering 10 years' horizon. So please be patient. In a few weeks' time, it will be released, and it will be published.
And also if you require information regarding LOTOS, but it will not include PGNiG.
Our next question comes in from Michal Kozak of Trigon.
I have 2 questions. The first one, do you see a risk of significant decrease of your throughput in refining chem [indiscernible] and/or Unipetrol in the next years?
And the second question, do you have plans to buy media groups or fertilizer companies in the near future? Should we expect any big transactions in this field?
Okay. Konrad Wlodarczyk speaking, I'll take the first question. So throughput, it's hard to answer this question because throughput depends definitely on the demand and macro situation. So I think that we can refer to the current macro situation. So maybe I will answer this question a little bit differently.
So I will tell you how we perceive this in Q4 because at this stage, as you perfectly know, we do not plan to significantly cut utilization in both Unipetrol and ORLEN Lietuva. But in Q4, we are planning to process 7.8 million tonnes of crude oil, which is, roughly speaking, 88% of utilization ratio, 96% in PKN ORLEN, 75% in ORLEN Lietuva and 87% in Unipetrol.
But here, of course, also the throughput in all of our refineries will be adjusted to the demand and macro environment, which is still quite challenging, especially when we are looking on the demand side.
Additionally, we are planning to conduct some maintenance shutdowns this quarter. So in Q4, in PKN ORLEN, there will be CDU units under the maintenance; 1 month hydro cracking, more than 1 month hydrogen, you need more than 1 month; and ORLEN Lietuva, 15 days of Vacuum Flasher maintenance shutdowns; and Unipetrol, more than 20 days of Visbreaking units.
So you see that we are planning to slightly decrease utilization quarter-on-quarter in Q4. But how the macro and the demand will look like in the near future, it's hard to answer this question.
Okay. And regarding to your second question on M&A targets. Of course, we are analyzing many different targets, and we are looking for the most interesting and fitting to our strategy. But at this moment, we cannot disclose anything [ currently ].
We continue with Mr. [ Maurice Taksiko ] of UBS.
I have two questions, please. The first one, just on the macro and one of the developments that we've seen over the past few weeks, is that the significant increase in European gas prices. So I was wondering if you can give us a sense of your sensitivity to gas prices or perhaps some indications of the volumes we should have in mind when it comes to your cost.
And then secondly, you mentioned at the end of your presentation that integration with biofuels is likely to gain in importance in refining. And you've talked before about plans to develop HVO at PKN. So I was wondering if you're thinking about building a greenfield HVO, if you're looking at converting one of your existing refineries to biofuel production or some sort of co-processing. [indiscernible] the strategy update in a few weeks, but I'd be interested to have some details out of that.
Okay. So I take the first question, Konrad Wlodarczyk. So gas -- the gas usage on the yearly basis in the ORLEN Group was 3.1 bcm last year, including 2.1 bcm in Poland, out of which 1.2 by Plock; 0.5, Anwil; and 0.5 CCGT Wloclawek and 0.7 CCGT Plock. And [ circa open to ] bcm in Unipetrol.
So taking into account, let's say, the price that was last year, so roughly speaking, PLN 800 per 1,000 bcm. So the cost of gas in Poland was, roughly speaking, PLN 2.3 billion. So definitely, gas prices -- decreasing gas prices is helpful for, let's say, the balance sheet of PKN ORLEN, yes, because it's quite significant cost.
In terms of greenfield investment, I think that you should wait until strategy will be published. I don't know if Karol would like to add something in this -- to this question.
Regarding biofuels, we are analyzing new installations, new units of biofuels in our refineries. We do not foresee transforming right now a large refinery into biofuel refinery. However, we are developing projects with the current locations regarding biofuel production.
And we continue with Mr. Dzieciolowski. I do apologize if I had mispronounced your name. Could you please identify where you are from? You have the floor.
It's Piotr Dzieciolowski from Citibank. I wanted to ask you firstly on Mažeiki? Nafta. At what point you may revisit the strategic rationale to keep this operation alive. What happens if next year, we have low margins and this [ refinery ] prints another negative number. Is there anything you can share with us on this?
Piotr, Konrad Wlodarczyk speaking. So as I've -- I took this question, I will try to answer it as usual. So ORLEN Lietuva is one of the most important assets for us and you know this perfectly. Additionally, due to the fact that when the demand was quite high, significant volumes from ORLEN Lietuva of diesel were exported to Poland, yes.
So PKN ORLEN realized currently around 25% of import. So this is a significant chunk. So definitely, at this stage, of course, the current macro environment, both for ORLEN Lietuva and Unipetrol are in red. But please bear in mind that if the macro environment will improve, so definitely, it will bring some positive results.
But as I said, as for now, we do not have plans to shut this refinery. We can adjust throughput to the current macro environment. But still, this refinery is very important from the point of view of transferring diesel volumes to Poland.
Okay. And the second question is, thinking about the full year 2020, what is your total marketing spend?
We do not provide marketing spendings, unfortunately. Sorry for this.
And our next call comes in from Mr. Robert Main (sic) [ Robert Maj ] of IPOPEMA Securities, I believe.
It's Robert Maj from IPOPEMA Securities. Partly you answered my question on Mažeiki? Nafta. But I will follow up on this. You mentioned in the presentation that you expected the refining capacities should adjust downwards by 3 million barrel per days to adjust to the new macro environment.
Do you see any refineries already shutting down in the region or in Europe? Because it's -- I understand it's clear that you will keep alive all your refineries in the group whatever happens, even if the margins are extremely low and the operations in Lithuania keep delivering results in the red.
Adam Czyzewski is online. So Adam, floor is yours.
Okay. There is significant overcapacity of -- in refining globally. As you said, it's 3 million of barrels per day. Half of it is located in Europe. And we observe in Europe, of what we can read that around almost 1 -- 0.75 or 750,000 of barrels per day are temporary or, let's say, for the longer term, this is out of the market, went out of the market. It makes 0.25 million of barrels are -- tend to do.
So if refineries are completely closed, these are announced and it's public information. But information about closures, which we gather through, let's say, our consultants like, for example, IHS Markit, they simply analyze adjustment in refining. And then on the base of the adjustment, on the basis of financial condition of the particular refineries, they try to predict whether they will be shut down or get out of the [ mainland ].
So [ days ] of refineries are not so important as capacity with those out of the market. And we are -- our refining -- or our -- I mean, business is less exposed to refining macro, which is clearly really bad right now than stand-alone refineries.
So in a sense, time is our friend because the worse is macro, the more capacity will be shut down and the more capacity is shut down or growth of the market, the better our prospects for refineries, which will stay on the market. And certainly, our refineries will stay in the market.
So we are in the process of deep restructurization of refining up to 2025, 1.6 millions of barrels per day should go out of the market. It's so-called -- it's called a big shock for refineries. And in the year 2020, 0.75 millions of barrels are already out of the market.
Okay. I would also follow up on your LOTOS transaction. What is the next news flow we should expect to come through from you? Or yes, what should we observe right now? And so I understand that the finalization of the M&A process should happen by the end of 2021. Is that correct?
I think so. But if you are asking about the next steps reported to the market, I think the major one will be the final outcome of our negotiations with potential investors regarding the remedies, and we should expect it by the end of first half of next year.
Our next question comes in from Igor Kuzmin of Morgan Stanley.
A couple of questions from me, please. It strikes me -- first one is about the guidance. So it strikes me that your EBITDA is actually -- on EBITDA -- at EBITDA level, the significance of refining petrochemicals have dramatically decreased.
So effectively, your EBITDA at like for level is actually equivalent to the sum of 2 segments, retail and energy, but the rest of it is basically -- applies to some minuses, are much less significant. In that context, I'd say, like, probably, would be helpful to hear your guidance on retail and energy into the next maybe couple of quarters or even further out, let's say, into 2021.
And second question, just drilling down into the segmental reporting. I was just wondering if you could potentially give a breakdown of free cash flows per segment.
Konrad Wlodarczyk speaking. So your question about the guidance. You know that we are not providing the guidance of EBITDA especially in such tough times. So everything definitely depends on the demand on the market. But I would not agree with you that only retail and energy segment delivered positive results because as you look on Q3 results, you perfectly know that due to integration of petrochemicals with refining, so results are again in black, yes?
So minus almost PLN 400 million on the refining side, offset by PLN 500 million positive on petchem side. So I think that PLN 500 million in petchem segment in also quite, let's say, challenging environment, is a good result, yes?
But as you see, this quarter, definitely the main result driver is energy segment. But please bear in mind that this is also due to the fact that we are fully consolidating group ENERGA in the result.
So if you exclude ENERGA Group results, results year-on-year are comparable. So roughly speaking, PLN 500 million. But retail, indeed, quite strong results, mainly due to the fact that margins are very healthy on the German and Polish market. But as for the guidance for the next year, sorry, I will not answer this question.
Okay. And what about free cash flow breakdown by segment?
Michal Perlik speaking. Igor, thank you for your question. Honestly speaking, this is the first time we have such request. So let us please internally check how we can improve our segment reporting. But I would not like to give any promises at this stage. As I said, this is the first time we meet such a request.
Next question comes from Ildar Khaziev of HSBC.
We do not hear the question.
Mr. Khaziev, are you still there?
Can you hear me?
Yes, we can. Please go ahead, sir.
Hello?
Yes, Ildar --.
Yes, Mr. Khaziev. Please go ahead.
So my question is about next year. I understand that you might -- already may be looking at the next year budget, but not -- maybe not in the position to share any numbers. But maybe you could just tell us what is your thought process about CapEx.
Do you have the same level of appetite for investments across different segments [ a lot ]? Are you still thinking of maybe launching immunization of [indiscernible]? Are you -- do you still have the same appetite for investments in refining in general and petchem?
Yes, thanks. So regarding the CapEx for the next year, as usual, we guide the possible CapEx after the full year results. So you should expect always one more quarter. But you will also receive some information in the strategy that we are planning to announce in a few weeks' time. So please be patient. Some really solid information regarding CapEx will be delivered with the strategy itself and guidance for 2021 with the full year results.
There are no further questions at this time. Perhaps at this time, it's up to me to return the floor to Mr. Wlodarczyk.
Thank you, operator. So if there are no more questions, I would like to thank you for participating in the conference call. So this concludes our presentation. Thank you, and have a nice day.
Thank you very much, ladies and gentlemen. The call has concluded. You may now disconnect.