Polski Koncern Naftowy Orlen SA
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Polski Koncern Naftowy Orlen SA
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Ladies and gentlemen, welcome to PKN ORLEN Third Quarter 2018 Consolidated Financial Results Conference Call. I will now hand over to Ms. Iwona Waksmundzka, IR Director. Madam, you may begin.
Thank you, operator. Good morning, everybody, and thank you very much for joining us today. Welcome to PKN ORLEN's conference call presenting our financial and operating results for the third quarter of 2018. Today, the results will be discussed for you by Mr. Rafal Warpechowski, Planning and Reporting Executive Director; and Mr. Konrad Wlodarczyk, IR Manager. The presentation, which was mailed to you and is available at our website, will be discussed first; and immediately after, the floor for Q&A session will be open. Mr. Piotr Kearney, Strategy Executive Director, will be available at the Q&A session as well.
With no further delay, I hand over to Mr. Rafal Warpechowski. Sir Rafal, the floor is yours.
Thank you. Good morning, ladies and gentlemen. Thank you very much for the interest in PKN ORLEN Q3 results, and let me start with the summary of major facts and figures for Q3 2018. First of all, we are very happy to inform that we achieved PLN 2.4 billion EBITDA LIFO for the quarter. It is the best quarterly results this year, and it has to be underlined that it was achieved in a -- in less favorable macro environment comparing to the prior year. We were running at almost full capacity utilization but still lower than prior year high. So that's why our sales decreased by 3% year-on-year. It was the next best quarter in retail, which supported our group EBITDA by over PLN 700 million. And final information, we continue with the diversification of crude oil supplies. This quarter, we arranged 1 vessel delivered from Nigeria to be processed in Plock refinery.
Financial indices confirm our very strong standing, we generated PLN 3.6 billion cash flow from operation for the quarter. We financed PLN 1 billion CapEx. We paid PLN 1.3 billion of dividend for the prior year profit, and we bought share remaining 70% -- 7% of minority interest in Unipetrol for almost PLN 700 million. All in all, we were able to decrease our net debt by PLN 0.6 billion over the quarter.
And just a comment, this statement for Unipetrol was done in Q3, but from a formal perspective, takeover is recognized on the 1st of October. So you will see the impact on our balance sheet and minority interest termination in fourth quarter of this year.
Now let me go through more detailed information on how we performed in this quarter. Starting from macro on Slide #5. As anticipated, at the beginning of the year, our model downstream margin in Q3 decreased by USD 1.1 per barrel year-on-year but still USD 12.8 per barrel, which is very solid level, which should be perceived healthily supporting our operation. This decrease comes mainly from high crude oil price, which obviously increased internal consumption cost, lower margins on heavy tractions in the refinery and also on polymers on petrochemical area.
This crude oil increase by $23 per barrel year-on-year, as I said, puts pressure on downstream industry while, at the same time, supported our upstream operations. And at the same time, growing crude created quite a significant LIFO effect, boosting our reported profits.
On average, Polish zloty in Q3 was slightly weaker versus U.S. dollar and euro but in the end of the quarter, strengthened a little bit. And that's why we recognized positive foreign exchange gains in financial affinity mainly on euro debt revaluation.
Next slide, also this information is coming from market-oriented data. We still enjoy GDP growth on the markets we are operating. And in principle, it should be followed by increased consumption of our products in -- especially in terms of fuel consumption, this information on the right part of the graph, again, want to underline that a very strong growth in Poland occurred, which creates potential for our further development indeed in Poland. Refinery volumes were higher in this quarter year-on-year.
Obviously, in Germany, we see some slowdown, and we observed a situation, there is no easy and one element that can explain this trend. But for sure, it's visible that diesel costs are less and -- not -- are no longer perceived by the market as the first choice. So that's mainly the reason. The second of this is there was some logistic constraint in Germany in Q3 like low water on river. So logistic of fuel was no difficult. But still, what is worth underlining that our operations in Germany performed better than the market and increased our volumes. So we are gaining market share, and this consumption was not affecting us.
So just to summarize, we may say, margin on our products in Q3 were lower year-on-year but still, supporting our operations in very solid demand, especially in Poland. So we were running in almost full capacity.
Next part from Slide #8 covers group consolidated financial results. Our sales revenue dropped very significantly by over 20% year-on-year, but obviously, it comes from higher crude oil quotations and thus, our -- also our products' quotations.
EBITDA LIFO, as I already mentioned, PLN 2.4 billion for the quarter, PLN 0.6 billion lower year-on-year. But this decrease comes, in fact, from lower less favorable macro and almost PLN 0.3 billion lack of positive impact of revaluation of inventory that we recognized in 2017. So we may say macro and one-off decreased result by PLN 0.7 billion, and PLN 0.1 billion positive impact comes from operation, especially in retail.
Already mentioned, growth in crude oil price and PLN 0.6 billion LIFO effect. So EBITDA reported reached over PLN 2 billion, meaning PLN 0.1 billion more year-on-year. Financial income this quarter, PLN 0.3 billion mainly from foreign exchange gains on euro debt revaluation plus positive valuation of financial instruments with interest less than [ PLN 60 million ]. So at -- in the end, we generated profit of PLN 2.1 billion, which was PLN 0.4 billion more year-on-year.
Let's speak of EBITDA LIFO by operating segment presented on Slide #9. PLN 1.98 billion comes from downstream and here, we see this decrease of results by PLN 0.8 billion, as already mentioned, less favorable macro, lack of prior year positive impact of NRV adjustment and slightly lower volumes in the segment.
Retail, increasing its results to the next record over PLN 700 million EBITDA, improvement by PLN 0.1 billion and upstream almost PLN 100 million EBITDA, also increased by over PLN 30 million year-on-year. And here, benefit is mainly from macro but also slightly higher volumes.
Now let me turn the presentation over to Konrad, who will comment on operational segment results.
Thank you, Rafal. Moving onto Slide #10, downstream. So our biggest segment delivered almost PLN 1.8 billion EBITDA LIFO in Q3. So despite the recent results, we recorded decrease by PLN 751 million year-on-year due to negative macro impact and lower sales volumes year-over-year. Macro worsened year-on-year mainly due to higher cost of internal usage as a result of higher crude oil price as well as lower cracks on heavy refining fractions, petchem products, fertilizers and PVC, which was partially offset by higher cracks on diesel and gasoline.
Sales volume decreased by 5% year-on-year and reflected dropping sales of all refining and petchem products. Here, 1 positive remark, so despite the drop in total of gasoline and diesel sales by 1% and 4%, respectively, in Poland, so the main market, we recall higher gasoline sales by 11% and higher diesel sales by 7% year-on-year. Just to remind you, last year results included EBITDA of PLN 300 million positive one-off effects from inventory revaluations and also from received compensation for delays in construction of CCGT in Wloclawek. So in fact, comparing apple to apple, EBITDA LIFO in Q3 '18 decreased by circa PLN 0.4 billion year-on-year.
Slide #11 shows operating data of Downstream segments. In Q3 PKN ORLEN processed 8.7 million tonnes of crude oil, which is 98% utilization ratio. And again, despite this very high throughput, we saw a decrease in crude oil processing by 3% year-on-year, mainly due to planned maintenance shutdown. Utilization was lower year-on-year in all our refineries: in Plock by 3 percentage points due to shutdown of reforming and olefin units, in Unipetrol by 5% due to shutdown of CDU unit and cyclical shutdown of steam cracker in Litvinov, and in ORLEN Lietuva by 4 percentage points due to test of maximum utilization of production facilities carried out in Q3 '17. Due to lower crude oil processed, of course, we recorded also drop in sales volumes by 5% year-on-year.
And going into detailed split market by market. In Poland, we recorded slight increase in sales volume year-on-year. In the Czech Republic, lower refining sales due to market and production limitations as well as lower petchem sales due to steam cracker shutdown year-on-year. And in ORLEN Lietuva, lower sales volume due to worsening of market conditions year-on-year.
Slide #12, Retail. Retail again delivered astonishing record high result, as Rafal mentioned before, PLN 723 million EBITDA LIFO, which is 19% higher year-on-year. And of course, such a great result was achieved due to positive impact of both higher sales volumes and higher diesel margins year-on-year, what you can see on the left bottom graph.
Significant sales increase by 7% year-on-year in total was recorded on all market, similarly as market shares. In terms of margins by fuel and non-fuel margins achieved on Polish, Czech and German markets at comparable margins on Lithuanian market year-on-year.
Next slide, Slide #13, shows operating data of Retail segment. And at the end of Q3, we had almost 2,800 fuel stations, which means that PKN ORLEN has still the largest retail network in Central Europe. Of course, increasing number of fuel stations by 30 year-on-year and very healthy demand was reflected in higher sales volume by 7% achieved on all markets.
In terms of market share, market share as well increased on all markets year-on-year. The highest increase was recorded in the Czech Republic by 2.6 percentage points year-on-year due to including all 60 fuel stations acquired from OMV into -- and incorporating this into -- then in our network and as well in Poland by a decent 0.4 percentage points year-on-year.
Please also have a look on further dynamic growth on non-fuel offer. Another 40 locations were opened in Q3, and at the end of the quarter, we were running 1,947 food and beverage corners, including convenience stores under our own brand, O!SHOP.
Slide #14. Upstream delivered in Q3 PLN 86 million EBITDA LIFO, which is higher by PLN 33 million year-on-year, mainly due to positive macro impact related to increase of crude oil and natural gas liquids prices offset by lower gas prices in Canada year-on-year. In Q3, we recorded higher production by 1% year-on-year mainly due to Canadian assets performance. So in Canada, average production increased by 0.2 thousand BOE per day year-on-year. Growth comes mainly from higher crude oil and NGLs production.
On Slide #15, you can see more operational details regarding Upstream. Recently, we have more than 150 million BOE 2P reserves based on the calculations from the end of last year. Average production in Q3 was at the level of 16.9 thousand BOE per day. In Q3, we spent on Upstream more than PLN 170 million, so after 9 months, almost PLN 550 million. This proves that we are in line with this PLN 800 million CapEx planned for the whole year.
And some key facts. So during Q3, in Poland, we discovered gas deposit in Wielopolska and North Carpathian; carried out reinforcement and production test on Edge projects, where accumulation of hydrocarbons was confirmed; continued and finished the acquisition of 2D and 3D safety data on Karpaty and Edge projects as well as started some drilling on both the projects.
In Canada, we started drilling of 6 wells. 3 wells were dropped and 2 wells were included into production. And moreover, we continued work on extension of infrastructure.
So that's all from my side. Thank you very much, and now I hand over to Rafal.
Thank you, Conrad. Coming back to financials and to cash flow data on Slide 17. We generated PLN 3.6 billion cash flow from operations based on EBITDA plus working capital decrease together with the LIFO effect. We spent PLN 1 billion in investment activity, which is equal to our CapEx for the quarter. And summary of cash flow management for the whole period from the beginning of the year for 9 months presented on the bottom of the graph, as visible in terms of the amount of LIFO effect, it almost offsets the net working capital increase and CapEx program of PLN 2.9 billion, then minority interest shares bought -- of Unipetrol bought for PLN 4.2 billion and dividend from prior year profit, PLN 1.3 billion. And after elements like taxes, interest, our debt increased by PLN 2.9 billion, comparing to the end of the prior year.
On the next slide, we confirm our strong and very improving financial position. Positive free cash flow for the first quarter enabled us to decrease the net debt by PLN 0.6 billion and net financial gearing to 10% in the end of September. And as visible on the bottom graph, sources of our debt are the same as in prior quarters with high utilization of existing bank credits, which were used together with our cash protections of Unipetrol shares. Majority of that is in euro to reflect our operational exposure and create kind of natural hedging to it, and our debt is still long term with average maturity in 2021.
And next slide is dedicated to CapEx. Over 9 months of this year, we spent PLN 2.9 million, of which the biggest portion to -- dedicated to downstream, PLN 1.9 million. Major projects like polyethylene, metathesis was breaking and for a propylene splitter in Lithuania. So with this confirming that we are progressing with major development projects, in Retail, we are spending CapEx according to schedule under this both new locations, modernization and development of non-fuel concept so well taken by the market. In Upstream, we spent PLN 550 million, majority in Canada, just proportion to scale of the business, again, according to the schedule.
And finally, on the Slide 21, just few comments on the market outlook for 2018. We may say that after 9 months of the year, it looks like our expectations presented at the beginning of the year are still valid, namely higher crude oil price, which is, as of now [ from a level ] higher than we expected due to potential U.S. sanctions, U.S. sanctions like Iran. But it is already $20 per barrel more compared to the average from the prior year.
In terms of model downstream margin, we expect at lower levels because of high crude oil price, and it is also confirmed, but still it is slightly higher than we expected because till now it is USD 12.2 per barrel. But GDP forecasts are still very solid, so it should support our consumption of our products. And in terms of regulations, in fact, all these information are the same as in the prior quarter, mainly only one element, this so-called heating oil package, which is under development, it is kind of additional step towards the elimination of potential reason in this area.
So that's all from our side. Thank you very much, and we are ready for Q&A.
[Operator Instructions] And we have the first question. The first question comes from Michal Kozak from Trigon.
I have 2 questions, the first 1 about land premium in retail and wholesale in Q4, quarter-on-quarter in refining. Do you expect any significant changes? And the next one, what is your outlook on petrochemical margins units amounts? Do you see larger supplies from the U.S. to Europe?
Okay. So first, the question related to -- just to confirm, in-land premium on retail and wholesale for Q4, yes?
Yes, yes.
So obviously, there is a question about crude oil price and its fluctuations. But still, we're quite optimistic because, as we said especially in Poland, the demand is there. So obviously, the Q4 is not so good as Q3 because -- due to seasonality. But we are quite optimistic in that area. In terms of retail, the same situation because retail is developing not due to one reason in Q3. It is both volumes, fuel margins and nonfuel. So it is very balanced development, and we believe it is solid beyond for further improvements.
And talking about the market impairment in Q4. So beginning of Q4, really it looks pretty weak. However, in just, let's say, few weeks, so we believe that it's [ main growth ]. We offset a sharp decrease in downstream margin by USD 2.3 per barrel quarter-on-quarter due to lower gold refining and petchem margin as a result of higher crude oil price and higher pressure on margin due to seasonally weaker demand in terms of refining products. So the diesel cracks, it's like quite strong, mainly due to unexpected lower supply from Russia in October, some planned maintenance shutdowns of refineries in our region and transportation problems due to low water level in Rhine River. In terms of gasoline drops, -- cracks, so gasoline dropped significantly quarter-on-quarter. However, last week, there was a rebound and cracks increased from USD 75 up to USD 100 per tonne due to high demand for shipments outside of Europe like Australia, Singapore and China as well as inventory decrease in Arab regions. Heavy heating oil cracks as well decreased mainly due to lower demands and inventory increase. In terms of petchem margins, here, we rather see a drop due to lower demands and positive remark via differential behavior, so via differential increase quarter-on-quarter from USD 1.3 per barrel up to USD 2.4 per barrel and here, mainly due to higher supply of Ural and partial increase in Brent prices. So we see that currently the market starts to improve. This modest investment, it was at the end of September or the beginning of October. So definitely quarter-on-quarter, you should expect deterioration, but we believe that it will be better than the offset price now.
Our next question comes from Alexander Burgansky from Renaissance Capital.
I actually have 3 questions if I may. So the first one, if you could possibly update us on your takeover situation with Grupa LOTOS, so where we are in this process and what is -- expect the next steps. The second thing is there's some news that you are moving ahead with plans to build a hydrocracker in Mažeikiai refinery. So can you please update us whether -- when do you plan to make a final investment decision? And what could be the cost and the time line associated with that upgrade? And lastly, with -- sorry, I think that's -- those probably are the 2 most important questions.
Piotr Kearney speaking here. I will start with LOTOS -- Grupa LOTOS transaction update. Yes, I mean, indeed, we are about in the process of preparation. We act according to the letter of intent with the government of Poland regarding the disposal of [ the sale ]. So nothing has changed to the transaction structure. In terms of preparations, there are 2 main stream: First is to get clearance from antimonopoly -- for concentration from antimonopoly EU regulators, and we really are advancing these talks. We submitted some set of analysis in August -- mid-August. With all that, now we are in direct discussion with [ Gdansk team ] who is dealing with our case. We plan to submit final application in -- proper application by the end of the year, so exactly according to our initial plan. Of course, it's one of our biggest transaction in the region today, and for sure, they requested that in many cases. So it's very a complex discussion, and they brought preparations of the application. And the second stream of our work is preparing the transaction itself. So we are in process of due diligence Grupa LOTOS. It's, of course, aiming to have our evaluation of the group, again, advanced situation.
And in terms of this question related to hydrocracking in ORLEN Lietuva, yes, indeed, we are contemplating this kind of investment. But as of today, we are just preparing kind of project and based on this project and technology, choosing we will be able to assess the economic of it. So we are not yet, at the moment, to decide whether to implement this project or not, so it's too early to say. But we are analyzing. We are building the case for it. And we will inform once we decide to progress with it.
If I can just follow up with one more question [ I would like to ask ] on the petrochemical side of things. So you announced earlier this year that you want to make a major investment in petrochemical area. So would you be able to maybe provide some details as to the plans of what exactly you're planning to invest in? And what is the time line on this investment and the impact on your financial performance?
Indeed, so the management board of PKN ORLEN had brought in the mid of June 2018 draft program of petrochemicals segment development by 2023, which will be a grant for the update of component strategy in the area of petrochemical assets development. This program assumes the realization of 3 key investments, like building aromatics, development of olefins and development of phenol capacity as well as building new R&D center necessary for its realization. So that's what we provided at this stage. It's estimated CapEx, which is at the level of PLN 8.3 billion and the estimated annual increase of EBITDA, realization of this investment may reach out to PLN 1.5 billion. So these are all details that we can provide you at this stage.
This is essentially what you said earlier. But is there any more sort of detail on when -- what exactly is going to be the time line of this investment? Are you planning to provide any more detail in -- to the market, perhaps, in the form of the strategy presentation, anything like that, so we can properly model it going forward?
As I said, some more details could be presented in the update of strategy that we are planning at the end of this year.
Of course, we can't comment now that -- regarding the CapEx, which is dedicated and planned, the real expenditures start in 2021. So after that, [ Q10 ] we are -- next 2 years are mainly preparation of investments with smaller CapEx.
Our next question comes from Henri Patricot from UBS.
I have a couple of follow-ups on investments and projects. The first one on your CapEx guidance for full year '18 at PLN 4.8 billion, so I think just PLN 2 billion above the 9 months figure. Should we expect to see such a step-up to PLN 2 billion in the fourth quarter? Or is that actually a bit of downside risk to your CapEx guidance for the full year? And then secondly, some existing projects, I wondered if you can actually give us an update on the latest expectations for startup of your projects or the polyethylene unit, metathesis unit and a bit later on the visbreaker.
Okay. Thank you for this question. Yes, indeed CapEx is slightly below what we planned. So still in Q4, we expect quite a significant increase, but yes, indeed, as of now our forecast is probably closer to PLN 4.5 billion rather than PLN 4.8 billion. And we may say that in the retail and in upstream, we are realizing CapEx according to schedule. So this PLN 300 million will -- this range of figure will probably -- will be probably the lower execution of CapEx in downstream.
So in terms of our main projects for this year, so polyethylene line in Czech Republic, so we are planning to launch this at the beginning of next year. We confirm that it will increase incrementally production of polyethylene by 150 kilotonnes per year and the potential EBITDA contribution on the yearly base up to [ PLN 300 million ]. In terms of metathesis in Plock, the project should be finalized till the end of this year. And additional 100 kilotonnes per -- of propylene production and up PLN 100 million EBITDA contribution on a yearly basis. In terms of visbreaking, we initiated this project, and it's going to be completed in the second half of 2021.
And I'd like to follow up, just the last one on the CCGT. Are you still expecting to restart in March?
Yes, CCGT, it was also after, let's say, initial analysis after the contractor, so GE was postponed from the December till the end of March. So we expect that it should be relaunched in March, yes.
Our next question comes from Tamas Pletser from Erste.
I got 2 questions. First of all, about your retail, what is the maximum earnings potential you can see from the current retail network? I mean, we see that this unit is still developing or growing the earnings quarter-on-quarter. What is the maximum you can imagine that the current metric without any organic -- without any, let's say, acquisitions can provide you? That will be my first question. And second, regarding this Wloclawek issue, what kind of compensation do you expect from GE on this malfunctioning unit?
Thank you for the questions. Starting from Wloclawek, as of now, we are rather thinking about improving -- I mean, modernization of the block. And just to confirm, as of now, we believe that it will be done by GE with no cost for us. So that's the first point. The second is obviously business interruption. We have it insured. So after kind of normal period of our -- when this -- this insurance -- we're not covered by insurance, we will simply -- may apply for business interruption from insurance. So it's -- that's still -- it is the future until we don't know when it starts. But rebuilding of block, elimination of all problems is on the side of GE, so no cost for PKN.
Just to remind you, CCGT, most of it generated circa PLN 30 million on a quarterly basis so have it in mind that will be out of order slightly more than half a year so more than, let's say, PLN 60 million, PLN 70 million just for this year and the additional costs of energy, which was previously produced by CCGT and let's say, fulfills all the needs of [ non-fuel ] right now we have to buy some energy from the market.
And the second question related to retail, this is really difficult to answer because retail is -- we think it's [ almost ] results every quarter, and still, we have some appetite for more. We still have some, especially this new [ model ] stations, which are under the construction. So based on assets we have now and modernization of them, still there is a potential for improvement, both in terms of volumes and in terms of non-fuel sales. So we are expanding non-fuel sales constantly. And in terms of prices, obviously, this is how market will react on what we are doing -- what will be possible to gain on the market. As of now consumption, especially in Poland, is very robust; in Czech Republic also, a high growth. So we are quite optimistic about it. And for sure, when we present new strategy, we will inform the market about our ambitions in retail.
Okay. So that basically means that on short term we can still expect this division to improve the results. Am I correct with this assumption?
Really, a few quarters already show this trend, so improving results. As I said earlier, it is not improvement due to any one-off. It is improvement based on improvement of all parameters. So non-fuel, fuel margin plus volumes. So really, prospects are still very good for retail.
Remember, Tamas, that we -- all the time, we add something to our non-fuel offer. We modernize convenient shops, corners, Stop Cafes. So it's very difficult to answer directly your question, but we really believe it's growing business.
Okay. So you still find something you can sell to the Polish and the other retail clients if I understand.
Not only for Polish customers because please bear in mind that we are just, let's say, copy paste. Let's say, the Stop Cafe performance and convenience stores to the Czech market, yes, which is also successful with fuels over there.
And to just to add to -- we have 2,800 fuel stations. On 2,000, we have this non-fuel cost, and so CapEx is at -- set to 0 convenience shops. So still, there is potential to expand and to modernize the network to provide these services on a higher number of stations. As Konrad said, half of Czech Republic is equipped with this concept.
[Operator Instructions] Next question comes from Piotr Dzieciolowski from Citibank.
I had a few questions. So firstly, can you please tell us how big was this recent discovery opportunity in Poland? Was it big? Or was it just for press? Or what's the potential there? And what are the financials that can go behind it? That would be the first question. The second question in light of what was said about your retail operations, how do you think about the sensitivity to GDP of this business now versus the situation from the past guidance? Let's imagine how much do you think this non-fuel margin stuff can squeeze -- can be squeezed when the bad times come.
So first question, discovery of gas in Poland. In terms of numbers, it was 2 billion cubic meters, so it is like 5% of consumption of gas in Poland. But just to inform you, it is -- and it is 20% of 2P reserves that we have in Poland. But please bear in mind that to start the production, we need like up to 2 years, and the exploration of the production is expected to last for like 10 years. So it is not one-off impact. It is really spread over time. So for us, it was a significant element of the business. Especially in Poland, as I said, it is 20% of utilization here.
And how much CapEx do you have to spend to get this production now?
It's -- as of now we are just doing the work to assess it to the sites how to prepare for the production. So that's why it is too early to say precisely about CapEx on it. We -- sorry, this is what I can say as of now. We just confirmed the quantity. Yes.
That could be a good reference point of how much General actually in Poland costs to find new stuff. I just would be interested to find out what was their total search cost and then development cost so we know what's sort of like cost of production of gas in Poland.
No, it is -- yes, it is -- but please bear in mind that if we look into the total CapEx of PLN 550 million for 9 months, you may say that PLN 150 million is related to Poland. And in Poland, if the production is really very low, it is like 1,000 BOE per day, so majority of this, almost this PLN 150 million goes to -- not to production but to -- at the first stage, so to the exploration. So this is very difficult to say what is the average cost. I may say that normally the drill like that is just double-digit number in terms of cost of drilling and then production depending on parameters, depending on the approach adopted by us [ made deeper ]. So it is so difficult to say. You may say [ that margins that is made ] back in Poland is very, very high compared to Canada, but again, this is low scale. So averaging may not be the good assessment in terms of particular place, particular project and region.
Yes, if you have -- the averaging here in Poland will be very difficult because there are too little -- I mean, too little -- the group of drills is too small in comparison with other areas. And if you have thousands to drill somewhere, you may say about some averages here [ that's very scalable ].
No. But, I agree averaging may be tough but at the end, you spent some money on the discovery, the first discovery we see in Poland from PKN and what we've been talking about is for 4 years. So I just wanted to clarify what are the numbers behind it. How much CapEx it cost you to find this gas? How much it will cost you to Canada? Is it worthwhile for PKN to really drill in Poland? Or is it better to buy from Germany ready gas?
Okay. So this is what I'm trying to say that the netback, when we produce in Poland, the netback is very high. It is over PLN 150, PLN 160 per BOE. But obviously, as I said, majority -- if you look from economic perspective, now EBITDA is PLN 2 million, while CapEx is PLN 150 million for 9 months so -- because it is spent on exploration, not production in majority. So that's why it is early stage, and that's why -- this is what we mean to say that averaging is very difficult here. But on producing assets, the netback is very high.
Okay. And over last 3 years, how much CapEx is spent on exploration in Poland? Was it also PLN 200 million annually?
It was -- that was the range that -- we had some more CapEx, as you remember, about an initial stage. It was Shell gas area, which was finally abandoned and closed by us. So yes.
Okay. And this has ability of additional non-fuel margin. Do you make any analysis or you have some focus started with the clients? What will happen when they're pressed by inflation or whatever, how these figures will behave?
As I said, obviously, there could be pressure from related not only to non-fuel sales but also -- margins but also the fuel sales. But as of now we are rather thinking that our retail performs very good comparing to the others. So for sure, if there is a pressure, we will feel it. But we believe we still can perform and get market share like we are doing today. Very difficult to predict what is the impact because, on one hand, we are not stable in retail. We are growing in terms of volumes and margin and in terms of non-fuel concept. So illumination of this trend will be difficult to share with you as of today. We still see good prospects based on estimation related to GDP, and obviously, we are analyzing also the impact of higher crude oil price. So it's obvious that it may affect the [indiscernible].
And do you make some profitability benchmark checks versus other networks in Western Europe or in Eastern Europe? How do you perform? Like what's your average profitability versus, let's say, [ more ] retail network profitability? How does this compare? Or any other internal checks that we should -- we could know how this business is performing?
Okay. So as of today, I'm not ready to share with you, so I would have to double check and come back to you with the answer. Sorry.
Our next question comes from Igor Kuzmin from Morgan Stanley.
I have a quick question on the dynamic on -- of working capital. Is there any some sort of specific amount that you already have in mind that potentially affects the performance of the company at the free cash flow level from a capital perspective in the first quarter? Any reversal -- obvious reversal that -- for we -- you're sitting and waiting to be reflected in the accounts?
I mean, I understand that the question is that if this drop in working capital in Q3 will be reversed in Q4, yes?
For example, yes.
But to what extent. So basically, obviously, the fluctuations in prices, especially of crude and then subsequently of our products, affect our working capital. But in Q3, we really had a kind of normalized level, maybe a few hundred millions in payables were paid at the beginning of Q4. So we may say it was slightly better performance in Q3, but it was like below PLN 0.5 billion. So that's potentially to be reversed in Q4. But if fluctuations is -- there are no extraordinary fluctuations in the market, it should be normally correlated with EBITDA as we said.
[Operator Instructions] As we have no other questions, dear speakers, back to you for the conclusion.
Thank you, operator. If there are no more question, I would like to thank you very much for participating in our call. We are happy that we have answered all the questions. If you have any follow-up questions, please feel free to contact with our IR department. We will be happy to get your questions. Thank you very much, and this is the end of our conference. Goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.