PKN Orlen and Lotos will meet on June 18 to discuss possible cooperation in oil extraction, Puls Biznesu reported, citing Lotos Chief Executive Pawel Olechnowicz. The competitors may discuss a partnership in bidding for access to oil deposits in Lithuania and Latvia, Puls cited Orlen's spokesman Dawid Piekarz as saying.
Our view: Both companies currently have limited financing possibilities due to heavy investments in downstream assets. We believe that cooperation might help them to share the costs and the risks of the project and to implement their strategic targets: Lotos can increase its production amounts, PKN – make a first step in upstream business. Since Lotos has an experience in dealing with offshore production we expect the company to be an operator. Since the total size of the project should not be high, the financial impact on the companies might be considered as minor. We see the neutral market reaction to the news.