PKN Orlen expects its 2006 results to be "very good" amid progress on restructuring and despite falling crude prices, the company's chief executive was quoted as saying on Monday. Chalupec admitted that the sweet-sour price differential and refining margins were lower in 3Q06 than in the previous quarters, but the retail and petrochemical margins were on the rise thus improving results of PKN's retail operations in Germany and of Unipetrol.
Our view: We would doubt that the full year result will be “very good” as PKN Orlen had major realization problems in the first quarter of the year and was not able to fully profit from the excellent refining margin environment in 2Q06 due the surged crude oil prices. Currently crude oil price as well as refining margin and sweet-sour price differential are relatively low which together should have a counterbalenced impact on the PKN’s performance. However, we consider the news on rising petrochemical margins as positive: a longer rise could indicate the upturn of the petchem cycle, which would be highly favorable for PKN's petchem units, including Unipetrol.