Parkiet published an interview with Lotos’ deputy CEO Zbigniew Paszkowicz who is responsible for exploration and production. The key highlights of the interview were as follows:
- Lotos reiterated its production target to reach annual hydrocarbon output of 1.2mt by 2015 supported by the launch of Yme, B8, an increase from Lithuanian production as well as new production from Norway/Poland/Lithuania.
- Lotos is unlikely to spend the entire PLN 3.9bn assumed in its strategy in 2011-2015 due to missing cash-flows from Yme. So far the company has spent PLN 0.5bn.
- Lotos is planning to carry out exploration works at B4 and B6 licenses in 2013-2014. Commercial scale production should not come before 2015. Lotos estimates there is over 4bcm of gas there.
- Lotos has four concessions and is considering buying more in Lithuania.
- Lotos produced 90k tons of oil from B3 deposit on the Baltic Sea and is preparing to launch production from B8 deposit, which is estimated at least at 3.5kt of oil per year.
The interview did not provide any groundbreaking information. We continue to have little confidence that Lotos will be able to achieve its target and produce 1.2mt by 2015. Current production is around 150kt and is unlikely to grow going forward. While Yme and B8 could be a nice addition (Lotos expects production at 700kt annually from the two fields), uncertainties are overwhelming regarding Yme while there has been not much update on B8 since 2010. Geonafta is unlikely to be a key driver as these fields are significantly depleted and are too shallow to have their production intensified through more advanced recovery techniques. In fact, Geonafta’s production may surprise on the downside given the steep decline since 2001 paired with no significant oil discoveries since then.
Regarding potential new production from Norway, Poland or Lithuania, we do not see the sufficient granularity on any project to incorporate them into our model. In sum, we maintain our production target at 780kt for 2015, some 35% below the company’s guidance.