Lotos will start drilling under the Baltic Sea for crude deposits estimated by the company at 101 MMbbl, more than two year's needs of the Gdansk refinery, the company said in its statement yesterday. These are the fields B8 and B23, which were previously explored. The project is expected to last through 2033.
Our view: This is definitely positive news to the market. Lotos tries to warrant the crude oil supply for its future refinery upgrade. In few years, the new fields could triple the company's current production of ca 250 ktpa, however probably still not enough to meet the production target of 1mtpa set for 2008 without new acquisitions. We remain to be very positive about the stock and reiterate our Buy recommendation with the fair value of PLN 60.7.