H1 2023 Report

S.N.G.N. Romgaz S.A.

11 August 2023

 

BOARD OF DIRECTORS' REPORT

1^ST HALF YEAR 2023

IDENTIFICATION DETAILS ON REPORT AND ISSUER

Report based on	Law No. 24/2017 on issuers of financial instruments and market operations (Article 67) and ASF Regulation (Financial Supervisory Authority) no.5/2018 on issuers of financial instruments and market operations (Annex No.14) for the six-month period ended on June 30, 2023 (H1 of financial year 2023) GEO No.109 of November 30, 2011 on corporate governance of public enterprises, as subsequently amended and supplemented - art.55 para (1)
Report Date	August 11, 2023
Company Name	Societatea Naţională de Gaze Naturale "ROMGAZ" SA
Headquarters	Mediaş, Piaţa Constantin I. Motaş, nr.4, 551130, Sibiu
Telephone/fax number	0040 374 401020 / 0040 269 846901
Web/E-mail	www.romgaz.ro / [e-mail]
Registration No. with the Trade Register Office	J32/392/2001
Fiscal Code	RO14056826
Legal Entity Identifier (LEI)	2549009R7KJ38D9RW354
Regulated market where the company's shares are traded	Bucharest Stock Exchange (shares) and London Stock Exchange (GDRs)
Subscribed and paid in share capital	RON 385,422,400
Shares main characteristics	385,422,400 shares, each with a nominal value of RON 1; nominative, ordinary, indivisible shares, issued dematerialised and free tradable since November 12, 2013 as SNG - for shares and SNGR - for GDRs

Romgaz^[1] Group Performances

Romgaz Group keeps high operational and financial performances in the first six months of 2023 (H1 2023).

National gas consumption recorded a decrease of roughly 12.4% for the first 6 months of 2023 as compared to the similar period of last year, while Romgaz deliveries decreased by 5.7%. Therefore, Romgaz market share[2] is 47.8%, by 3.4% higher than the share held in the similar period of last year.

Natural gas production for the first half of 2023, was 2,383.3 million m³, indicating a 5.2% production decline related to production recorded in H1 2022.

Romgaz electricity production reached 497.579 GWh, lower by 47.08 GWh than the production recorded in the similar period of 2022 (-8.64%). This production placed Romgaz at a market share of 1.69%^[3].

Consolidated net profit per share (EPS) was RON 4.4.

Margins of the main profitability indicators for H1 2023: net consolidated profit (34.42%), consolidated EBIT (59.19%) and consolidated EBITDA (64.52%) increased significantly as compared to the first half of 2022 (23.02%; 26.19% and 29.12% respectively).

The increase is due to lower royalty expenses (RON 290.1 million in H1 2023 compared to RON 917.1 million in H1 2022) and due to lower expenses with the windfall tax from gas sales activities (RON 645.1 million in H1 2023, compared to RON 3,607.3 million in H1 2022) following GEO No.27/2022[4]. According to this Ordinance, natural gas quantities sold for 150 RON/MWh are exempted from payment of the windfall tax, and royalty is calculated and paid at this price and not at the reference price communicated monthly by the National Agency for Mineral Resources.

Relevant financial results (consolidated)

                                                                                                                                   *RON million*

Q2 2022	Q1 2023	Q2 2023	Δ Q2 (%)	Main Indicators	HI 2022	HI 2023	Δ HI (%)
3,570.3	2,909.0	1,988.3	-44.31	Revenue	7,496.0	4,897.3	-34.67
3,680.1	2,984.5	2,141.2	-41.82	Income	7,604.5	5,125.6	-32.60
2,792.5	1,199.5	921.9	-66.99	Expenses	5,547.5	2,121.5	-61.76
0.3	0.5	1.1	266.67	Share of the associates' result	0.2	1.6	700.00
887.9	1,785.5	1,220.3	37.44	Gross Profit	2,057.3	3,005.7	46.10
141.6	815.5	504.6	256.36	Profit Tax	331.3	1,320.1	298.46
746.3	970.0	715.6	-4.11	Net Profit	1,725.9	1,685.6	-2.34
825.7	1,742.4	1,156.1	40.01	EBIT	1,963.2	2,898.6	47.65
956.2	1,882.4	1,277.2	33.57	EBITDA	2,182.7	3,159.6	44.76
1.9	2.5	1.9	-4.11	Earnings per share *) (RON)	4.5	4.4	-2.34
20.90	33.34	35.99	72.18	Net Profit Rate (% from Revenue)	23.02	34.42	49.49
23.13	59.90	58.15	151.42	EBIT ratio (% from Revenue)	26.19	59.19	125.99
26.78	64.71	64.24	139.85	EBITDA ratio (% from Revenue)	29.12	64.52	121.57
5,884	5,943	5,944	1.02	Number of employees at the end of the period	5,884	5,944	1.02

The figures above are rounded. Therefore, small differences may result upon reconciliation.

Note: income and expenses do not include in-house works capitalized as non-current assets.

Summary of the Group's main indicators for H1 2023:

-       Total income decreased by RON 2,478.9 million in H1 2023, recording a drop of 32.6% due to the following factors:  

·      Decrease of revenue from natural gas sales (RON 4,283.68 million in H1 2023 as compared to RON 6,694.78 million in H1 2022); deliveries decreased by 5.5% than in H1 2022, an important effect in reducing the revenue from gas sales was triggered by the obligation imposed by GEO No.27/2022,  under which Romgaz had to sell most of production at a regulated price of 150 RON/MWh (86.16% of H1 2023 deliveries (21.22 TWh) were made at regulated price, compared to H1 2022, when only 4.23% of deliveries (1.10 TWh) were made at regulated price);

·      Revenue from electricity sales also recorded a decrease (RON 200.40 million in H1 2023 as compared to RON 498.58 million in H1 2022). As of 2023, Romgaz had to sell almost all electricity produced at 450 RON/MWh, according to GEO No. 27/2022;

·      Revenue from storage services increased by 59.84% (RON 287.29 million in H1 2023 as compared to RON 179.74 million in H1 2022), mainly due to increased capacities booked by clients for natural gas storage;

-       Total expenses decreased in H1 2023 by 61.76% (-3,426.00 million), mainly due to the reduced windfall tax for natural gas (-2,962.16 million) and royalty expenses (-627.05 million);

-       Increase of the gross consolidated profit by 46.10% as compared to H1 2022 was offset by the profit tax. The profit tax includes the solidarity contribution introduced at the end of 2022, the expense recorded with this contribution in H1 2023 was RON 970.92 million;

-       Net consolidated profit of RON 1,685.64 million, by 2.34% lower, namely by RON 40.30 million, as compared to the similar period of last year;

-       Labour productivity decreased as compared to the previous period, from RON 1,273.97 thousand revenue/employee in H1 2022 to RON 823.91 thousand revenue/employee in H1 2023 (-35.33%);

-       EPS of RON 4.4 is by 2.34% lower than recorded in H1 2022.

Operational results

Q2 2022	Q1 2023	Q2 2023	Δ Q2 (%)	Main Indicators	HI 2022	HI 2023	Δ HI (%)
1,207.9	1,236.7	1,146.6	-5.1	Gas production (million m3)	2,515.1	2,383.3	-5.2
83.8	88.5	78.6	-6.2	Petroleum royalty (million m3)	176.5	167.1	-5.3
5,239	5,617	5,322	1.6	Condensate production (tons)	10,607	10,939	-3.1
199.3	323.0	174.5	-12.4	Electricity production (GWh)	544.7	497.6	-8.64
63.7	1,114.9	42.4	-33.4	Invoiced UGS withdrawal services (million m3)	1,090.1	1,157.3	6.2
702.2	45.4	814.3	16.0	Invoiced UGS injection services (million m3)	781.0	859.7	10.1

Note: the information is not consolidated, namely it contains transactions between Romgaz and Depogaz.

H1 2023 gas production was influenced by:

-       production decline specific for production of hydrocarbon reservoirs; 

-       well workover operations at wells with low productivity or inactive wells;

-       ongoing rehabilitation projects of main mature gas fields;

-       optimisation of gas field exploitation;

-       investments to expand production infrastructure and to connect new wells to it.

National gas consumption estimated for H1 2023 was 55.6 TWh, approximately 12.4% lower than the consumption recorded in H1 2022, out of which about 8 TWh was import gas and the difference of 47.6 TWh is gas from domestic production, Romgaz deliveries being 26.6 TWh, representing 47.8% of the national consumption and 55.8% of the consumption covered with gas from domestic production.

Electricity production is shown in the table below and its trend was closely related to the energy demand, price trends on competitive markets and equipment maintenance and repair activities.

                                                                        *MWh*

	2022	2023	Variation
1	2	3	4=(3-2)/2x100
Q1	345,337	323,037	-6.46%
Q2	199,323	174,542	-12.43%
H I	544,660	497,579	-8.64%

The full version of the Board of Directors' Report for 1^ST Half Year 2023, the Consolidated Condensed Interim Financial Statements (not audited) for the six-month and three-month periods ended June 30, 2023 and the Separate Condensed Interim Financial Statements (not audited) for the six-month period ended June 30, 2023, prepared in accordance with International Accounting Standard 34, are available on company's website www.romgaz.ro - Section Investors - Interim Reports and on Bucharest Stock Exchange website, at the link bellow.

http://www.rns-pdf.londonstockexchange.com/rns/0621J_1-2023-8-11.pdf

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[1] Romgaz Group consists of S.N.G.N. Romgaz S.A. ("the Company"/"Romgaz") as parent company and its wholly owned subsidiaries, Filiala de Înmagazinare Gaze Naturale Depogaz Ploiești SRL ("Depogaz") and Romgaz Black Sea Limited.

[2] Market share is calculated as a weight of Romgaz deliveries in the total national gas consumption.

[3] Source: CNTEE Transelectrica SA

[4] Emergency Ordinance No.27 of March 18, 2022 on measures applicable to end users from the electricity and gas market during April 1, 2022 - March 31, 2023, as well as for amending and supplementing some pieces of legislation in the energy sector, as subsequently amended and supplemented.

 

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