15 Feb 2019 07:00
IDENTIFICATION DETAILS ON REPORT AND ISSUER
Preliminary annual report according to Article 61 of Law 24/2017
Financial year: 2018
Report date: February 15, 2019
Name of the Company: Societatea Nationala de Gaze Naturale (SNGN) ROMGAZ SA
Headquarters: Medias, Constantin I. Motas Square, no.4, code 551130
Telephone/fax number: 004-0374-401020 / 004-0269-846901
Fiscal Code: RO14056826
LEI code: 2549009R7KJ38D9RW354
Trade Registry No: J32/392/2001
Subscribed and paid in share capital: RON 385,422,400
Regulated markets where the issued securities are traded: Bucharest Stock Exchange (BVB), London Stock Exchange (LSE)
PRELIMINARY CONSOLIDATED ANNUAL REPORT
(issued based on unaudited consolidated financial information prepared
in compliance with the International Financial Reporting Standards)
ON THE ECONOMIC AND FINANCIAL ACTIVITY OF SNGN "ROMGAZ" SA GROUP1 for 2018
OVERVIEW
S.N.G.N. Romgaz S.A. is a Romanian natural gas producer and supplier, the business segments of the Group being: gas exploration, gas production and supply, underground gas storage and electricity production.
Romgaz Group preliminary performances in the year ended on December 31, 2018 were influenced by the following factors:
Ä Gas production was 5,333 million m3, 175 million m3 higher than the production recorded during the previous year (+3.39%) and 1.6% higher than budgeted;
Ä The production has increased for the second year in a row;
Ä Estimated revenue for the year 2018: RON 5 billion (2017: RON 4.6 billion), increased by 9.07%;
Ä Preliminary net profit for the year 2018: RON 1.4 billion (2017: net profit adjusted with the recognized income from the reimbursement of excise duty for technological gas consumption - RON 1.6 billion);
Ä The Net Profit recorded in Q4 was RON 401.9 million, a decrease by 37.7% as compared to the same period of the previous year (Q4 2017) but 75.7% higher than the previous quarter (Q3 2018) pursuant to a revenue increase of 60.46%;
Ä The Net Profit Margin in Q4 was 25.8% (year 2018: 28.6%) and the EBIT margin was 27.5% (year 2018: 32.1%) further to the impairment recorded for the Group's assets;
Ä Increase by 51% of petroleum royalty expenses (RON 445 million in 2018 as compared to RON 294 million in 2017) as a result of National Agency of Mineral Resources Order no.32/2018 on approving the Methodology for setting the reference price for natural gas produced in Romania, whereby the reference price used to calculate the royalty becomes the reference price of index "PEGAS CEGH Day Ahead Market Single Day Select, VWAP/CEGHIX Central European Gas Hub AG (CEGH)";
Ä Increase by RON 164 million (43%) of the windfall tax further to the deregulation of prices in the gas sector;
Ä Gas field assets impairment of RON 103.6 million as a result of an internal analysis regarding their profitability;
Ä RON 54 million impairment of assets representing the current Iernut powerplant as a consequence of forecasting termination of its activity in 2020, the year of commissioning the new powerplant which is currently under construction;
Ä Doubling exploration costs representing 3D seismic services for the discovery of new reserves (RON 98 million in 2018 as compared to RON 48 million in 2017);
Ä Increase in investments made in 2018 from RON 781.8 million in 2017 to RON 1.15 billion.
Ä Electricity production decreased in 2018 as compared to the previous year by 37.48% due to Hidroelectrica's domination of the market, increased demand for natural gas consumption and storage;
Ä Gas trading from internal production aimed at securing a balanced portfolio of customers, at reducing the risk related to payment defaults and at being present on the free market to ensure price flexibility;
Ä Revenue from natural gas storage activities decreased by 41% being estimated at RON 298 million as a consequence of reducing storage tariffs approved by ANRE, despite the increased injected into/withdrawn gas quantities from the storage in 2018 as compared to 2017;
Ä It is estimated that revenue from electricity sales decreased by 30.6% as compared to the previous year; according to Transelectrica, the electricity generation market share was 1.83% during 2018 and 2.7% for Q4 2018;
Ä EBITDA related to 2018 remains at a high level of 44.93% related to the revenue, despite recording a decrease as compared to the previous year (2017: EBITDA margin adjusted with natural gas excise - 52.71%).
PHYSICAL INDICATORS
The table below shows a comparison of the main indicators related to gas and condensate production, royalty, electricity production and invoiced UGS injection/withdrawal services:
Q3 2018 | Q4 2018 | Q4 2017 | Δ Q4 (%) | Main Indicators | 2018 | 2017 | Δ 12 months (%) |
1.282 | 1.411 | 1.406 | 0.36 | Gross gas production (BCM) | 5.333 | 5.158 | 3.39 |
1,793 | 2,589 | 1,393 | 85.86 | Condensate production (tonnes) | 7,867 | 5,742 | 37.01 |
0.092 | 0.104 | 0.103 | 1.43 | Petroleum royalty (BCM) | 0.388 | 0.371 | 4.44 |
284.4 | 414.5 | 398.3 | 4.07 | Electricity production (GWh) | 1,165.2 | 1,863.8 | -37.48 |
12.3 | 819 | 537 | 52.51 | Invoiced UGS withdrawal services (million m3) | 1,949.9 | 1,745.5 | 11.71 |
860 | 119.6 | 121.8 | -1.81 | Invoiced UGS injection services (million m3) | 1,731.2 | 1,497.6 | 15.60 |
The preliminary natural gas quantities produced, supplied, injected in/withdrawn from the underground storages (UGS) and gas quantities used for electricity production between January -December 2018 in comparison to 2017 and 2016 are described in the table below (million m3):
Item no | Specification | 2016 | 2017 | 2018 | Indices |
0 | 1 | 2 | 3 | 4 | 5=4/3x100 |
1 | Total - gross production, out of which: | 4,219.4 | 5,157.5 | 5,333.3 | 103.4% |
1.1. | * internal gas production | 4,068.0 | 4,987.7 | 5,177.1 | 103.8% |
1.2. | * Schlumberger joint venture (100%) | 151.3 | 169.8 | 156.3 | 92.0% |
2 | Technological consumption | 54.5 | 74.5 | 86.4 | 116.0% |
3 | Net internal gas production (1.-1.2.-2.) | 4,013.6 | 4,913.2 | 5,090.6 | 103.6% |
4 | Internal gas volumes injected in storages | 414.7 | 253.5 | 348.1 | 137.3% |
5 | Internal gas volumes withdrawn from storages, of which: | 462.6 | 723.5 | 479.4 | 66.3% |
5.1 | - gas cushion | - | - | 6.9 | - |
6 | Differences resulting from GCV | 4.5 | 2.7 | 1.4 | 51.9% |
7 | Volumes supplied from internal production (3.-4.+5.-6.) | 4,057.0 | 5,380.5 | 5,220.5 | 97.0% |
8.1 | Gas sold in storages | 79.2 | - | 8.1 | - |
8.2 | Gas supplied to Iernut and Cojocna Power Plants from Romgaz gas | 463.7 | 506.4 | 326.7 | 64.5% |
9 | Gas supplied from internal production to the market (7.+8.1.-8.2) | 3,672.5 | 4,874.1 | 4,901.9 | 100.6% |
10 | Natural gas from partnerships*) - total, out of which: | 149.0 | 175.5 | 163.6 | 93.2% |
*Schlumberger (50%) | 75.7 | 84.9 | 78.2 | 92.0% | |
*Raffles Energy (37.5%) | 0.3 | 0.1 | 0.0 | 0.0% | |
*Amromco (50%) | 73.0 | 90.5 | 85.4 | 94.4% | |
11 | Purchased internal gas volumes (imbalances included) | 11.2 | 27.0 | 9.7 | 35.9% |
12 | Sold internal gas volumes (9.+10.+11.) | 3,832.7 | 5,076.6 | 5,075.2 | 100.0% |
13 | Supplied internal gas volumes (8.2+12.) | 4,296.4 | 5,583.0 | 5,401.9 | 96.8% |
14 | Supplied import volumes | 6.8 | 33.0 | 181.4 | 549.7% |
15 | Gas supplied to Iernut and Cojocna Power Plants from other sources (imbalances included) | 4.8 | 40.3 | 19.4 | 48.1% |
16 | Total gas supplies (13.+14.+15.) | 4,308.0 | 5,656.3 | 5,602.7 | 99.1% |
* | Invoiced UGS withdrawal services | 1,440.9 | 1,745.5 | 1,949.9 | 111.7% |
* | Invoiced UGS injection services | 1,367.4 | 1,497.6 | 1,731.2 | 115.6% |
ECONOMIC-FINANCIAL INDICATORS
The economic-financial indicators have been calculated based on unaudited preliminary consolidated financial statements and may be different from the actual audited results.
The Group's revenue is mainly generated by the sale of natural gas (internal and import), by the underground gas storage services and by the electricity production.
Preliminary consolidated comprehensive income for the year ended on December 31, 2018 (unaudited)
Description
| Preliminary | Preliminary | Actual | Actual | Variation | Variation |
Q4 2018 | 2018 | Q4 2017 (restated) **) | 2017 (restated) **) | Q4 | 2018-2017 | |
(thousand RON) | (thousand RON) | (thousand RON) | (thousand RON) | (%) | (%) | |
1 | 2 | 3 | 4 | 5 | 6=[(2/4)-1]x100 | 7=[(3/5)-1)x100 |
Revenue | 1,556,635 | 5,001,242 | 1,343,540 | 4,585,186 | 15.86 | 9.07 |
Cost of commodities sold | (59,933) | (245,020) | (11,577) | (61,095) | 417.69 | 301.05 |
Investment income | 13,299 | 53,279 | 6,702 | 22,350 | 98.43 | 138.38 |
Other gains or losses | (44,972) | (102,563) | (31,705) | (120,335) | 41.85 | -14.77 |
Net losses from impairment of trade receivables | 176 | (19,941) | - | - | n/a | n/a |
Changes in inventory | (37,792) | (19,179) | (86,009) | (186,651) | -56.06 | -89.72 |
Raw materials and consumables used | (22,277) | (75,460) | (16,109) | (64,329) | 38.29 | 17.30 |
Net depreciation and amortization | (253,126) | (641,524) | (139,616) | (521,479) | 81.30 | 23.02 |
Employee benefit expenses | (186,409) | (621,330) | (162,648) | (562,894) | 14.61 | 10.38 |
Financial costs | (7,096) | (26,175) | (5,339) | (18,624) | 32.91 | 40.54 |
Exploration expense | (52,015) | (247,123) | (37,412) | (184,854) | 39.03 | 33.69 |
Share of associates' result | 572 | 622 | 1,212 | 1,375 | -52.81 | -54.76 |
Other expenses | (471,661) | (1,414,184) | (390,349) | 1,090,649) | 20.83 | 29.66 |
Other income | 5,689 | 16,160 | 279,558 | 364,169 | -97.97 | -95.56 |
Profit before tax | 441,090 | 1,658,804 | 750,248 | 2,162,170 | -41.21 | -23.28 |
Income tax expense | (39,199) | (230,421) | (104,713) | (322,905) | -62.57 | -28.64 |
Profit for the period | 401,891 | 1,428,383 | 645,535 | 1,839,265 | -37.74 | -22.34 |
Other comprehensive income | ||||||
Items that will not be reclassified subsequently to profit or loss | ||||||
Actuarial gains/(losses) on post-employment benefits | (7,928) | (7,928) | - | - | n/a | n/a |
Income tax relating to items that will not be reclassified subsequently to profit or loss | 1,268 | 1,268 | - | - | n/a | n/a |
Total items that will not be reclassified subsequently to profit or loss | (6,660) | (6,660) | - | - | n/a | n/a |
Other comprehensive income for the period net of income tax | (6,660) | (6,660) | - | - | n/a | n/a |
Total comprehensive income for the period | 395,231 | 1,421,723 | 645,535 | 1,839,265 | -38.77 | -22.70 |
EBITDA *) | 680,917 | 2,247,049 | 638,776 | 2,416,916 | 6.60 | -7.03 |
EBITDA margin (%) *) | 43.74 | 44.93 | 47.54 | 52.71 | -8.0 | -14.8 |
EBIT *) | 427,791 | 1,605,525 | 499,160 | 1,895,437 | -14.30 | -15.30 |
EBIT margin (%) *) | 27.48 | 32.10 | 37.15 | 41.34 | -26.03 | -22.34 |
EPS (RON) ***) | 1.01 | 3.69 | 1.67 | 4.77 | -39.52 | -22.64 |
*) EBITDA and EBIT for 2017, namely related to Q4 2017 and their margins are adjusted with the income recorded as a result of finalising in 2017 the fiscal control on excises, given the singular nature of this income.
**) In 2018 the Group modified on voluntary basis the accounting policy related to costs with seismic, geological, geophysical works and other similar operations. According to the new policy, these costs are recognized as expenses when incurred. Previously, these were recognized as intangible exploration assets. To reflect the change and ensure comparability of information, previous periods were restated.
***) EPS is calculated based on SNGN Romgaz SA individual results.
Revenue
In 2018, Romgaz estimates consolidated revenue of RON 5.00 billion compared to RON 4.59 billion achieved in 2017.
The increase resides from a 17.7% rise of revenue from sales of internal Romgaz produced gas and of gas purchased for resale as well as gas from joint ventures, despite the decrease of revenue from electricity sales (30.62%) and the decrease by 41.08% of revenue from storage services. Such decrease is due to a 26% drop of storage tariffs approved by the ANRE, applied as of April 1, 2018.
Cost of Commodities Sold
In 2018, cost of commodities sold increased by 301.05%, due to an increase by 603.25% of the cost of commodities gas sold, due to 549.7% higher quantities of commodity gas sold from import. Nevertheless, the Group's result was not significantly influenced by selling import gas.
Investment Income
Investment income represent income from placing Group's liquidities in bank deposits or in state bonds. The 138.38% increase as compared to 2017 is generated by the increase of interest rates.
Other Gains and Losses
Other gains and losses have to be analysed together with Net losses from the impairment of trade receivables. As a result of implementing IFRS 15, these losses are stated separately in the preliminary statement of consolidated comprehensive income. The Group opted for applying IFRS 15 without restating the previous period.
As compared to 2017, net losses increased by 1.8%.
Changes in Inventory
The reduction of the negative effect of changes in inventories in 2018 compared to 2017 is due to a 38% higher gas quantity withdrawn from storages as compared to the injected one, in relation to 2017 when the withdrawn quantity was 185% higher than the injected one.
Depreciation, Amortization and Impairment
Depreciation, amortization and impairment of non-current assets, tangible and intangible assets increased in 2018 by 23.02% compared to 2017 mainly due to an impairment of RON 103.6 million of gas fields operated by Romgaz, further to the impairment test performed in December 2018. Moreover, the Group recorded a RON 54 million impairment of assets representing current Iernut powerplant because of forecasting termination of its activity in 2020, the year of commissioning the new powerplant, which is currently under construction.
Employee benefit expense
The 10.38% increase of employee benefit expenses in 2018 is due both to the indexation of salaries to cover the inflation and granting incentive bonuses for remarkable results, according to the human resource policy.
Exploration expenses
Out of the exploration expenses for 2018 of RON 247.1 million, 3D seismic activities represent RON 97 million, a 104% increase as compared to the previous year. These expenses prove the Group's engagement for the discovery of new reserves.
The abandonment costs of exploration projects are 9% higher as compared to the previous year, but their effect is offset by releasing to income the applicable impairment.
Other expenses
In 2018, other expenses recorded a 29.66% increase as compared to the previous year. The increase of RON 323.5 million is mainly due to higher expenses with fees and taxes (royalty and windfall tax, as mentioned in the introductory section).
Other income
Decrease of other income is mainly due to recording in 2017 an income of RON 244 million representing excises for the technological consumption between 2010-2016. On the date hereof, the Group recovered the entire amount.
Preliminary Statement of Consolidated Financial Position as of December 31, 2018 (unaudited)
INDICATOR | Preliminary December 31, 2018 | Actual December 31, 2017 *) restated | Variation |
(RON thousand) | (RON thousand) | (%) | |
1 | 2 | 3 | 4=(2-3)/3x100 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 6,060,357 | 5,842,708 | 3.73 |
Other intangible assets | 4,970 | 8,629 | -42.40 |
Investments in associates | 23,298 | 22,676 | 2.74 |
Deferred tax asset | 112,478 | 66,272 | 69.72 |
Other financial assets | 9,812 | 69,678 | -85.92 |
TOTAL NON-CURRENT ASSETS | 6,210,915 | 6,009,963 | 3.34 |
Current assets | |||
Inventories | 259,061 | 389,515 | -33.49 |
Trade and other receivables | 433,369 | 816,086 | -46.90 |
Contract assets | 390,395 | - | n/a |
Contract costs | 583 | - | n/a |
Other financial assets | 881,245 | 2,787,261 | -68.38 |
Other assets | 168,080 | 305,913 | -45.06 |
Cash and cash equivalents | 566,836 | 227,167 | 149.52 |
TOTAL CURRENT ASSETS | 2,699,569 | 4,525,942 | -40.35 |
TOTAL ASSETS | 8,910,484 | 10,535,905 | -15.43 |
EQUITY AND LIABILITIES | |||
Equity | |||
Issued capital | 385,422 | 385,422 | 0.00 |
Reserves | 1,825,568 | 2,312,532 | -21.06 |
Retained earnings | 5,546,940 | 6,296,875 | -11.91 |
TOTAL EQUITY | 7,757,930 | 8,994,829 | -13.75 |
Non-current liabilities | |||
Retirement benefit obligation | 130,075 | 119,482 | 8.87 |
Provisions | 204,696 | 280,601 | -27.05 |
TOTAL NON-CURRENT LIABILITIES | 334,771 | 400,083 | -16.32 |
Current liabilities | |||
Trade payables and other liabilities | 186,084 | 606,109 | -69.30 |
Contract liabilities | 46,381 | - | n/a |
Current tax liabilities | 69,555 | 128,520 | -45.88 |
Deferred income | 29,570 | 970 | 2948.45 |
Provisions | 93,760 | 76,290 | 22.90 |
Other liabilities | 392,433 | 329,104 | 19.24 |
TOTAL CURRENT LIABILITIES | 817,783 | 1,140,993 | -28.33 |
TOTAL LIABILITIES | 1,152,554 | 1,541,076 | -25.21 |
TOTAL EQUITY AND LIABILITIES | 8,910,484 | 10,535,905 | -15.43 |
*) In 2018 the Group voluntarily modified the accounting policy regarding recognizing the costs with seismic, geological, geophysical works and other similar operations. Pursuant to the new policy, these costs are recognized as expenses when incurred. Previously, these costs were recognized as intangible exploration assets. Information from previous periods was restated to ensure comparability to the current period.
NON-CURRENT ASSETS
Property, plant and equipment
Total property, plant and equipment increased by 3.73% namely by RON 217.6 million, from RON 5.8 billion on December 31, 2017 to RON 6.1 billion on December 31, 2018. Even though in 2018 the Group estimates it invested RON 1.15 billion, the increase was partially cut by the amortisation costs (RON 563 million in 2018 compared to RON 543 million in 2017) and depreciation adjustments (net cost of depreciation of RON 79 million in 2018 compared to a net income of RON 22 million in 2017). From the value of investments made in 2018 namely RON 1.15 billion, RON 569 million is the investment in the new Iernut plant.
With regard to other financial investments, in 2018, the Group recorded a decrease in the fair value of Electrocentrale Bucuresti investment with RON 59.9 million. Out of this value, RON 40.7 million affected the annual result, the difference being recognized in retained earnings following the transition to IFRS 9.
Investments in associates are accounted for in the consolidated financial statements by the equity method which implies that the investment is initially recognized as cost and adjusted afterwards, depending on the post-acquisition modifications, in the apportioned share of the Group in the associate's net assets in which the investment had been made. The Group's profit or loss includes its share of the associate's profit or loss.
Deferred tax asset
Deferred tax asset is based on the temporary differences between the accounting value and the fiscal value of balance sheet items. These temporary differences may be taxable, meaning they will result in taxable values when determining the taxable result of future periods, or deductible, meaning they will result in values that are deductible when determining the taxable result of future periods.
Taking into account the adjustments of depreciation registered for the fields operated by the Group and for the current plant in Iernut, the temporary difference between the accounting and the fiscal value of the assets increased, which generated a rise in the deferred tax asset on December 31, 2018 in comparison to December 31, 2017.
CURRENT ASSETS
Inventories
Inventories decreased at the end of 2018, as compared to 2017, by 33.49% because of a decrease of 49% of gas stock from the storage as compared to the previous year.
Trade and other receivables. Assets related to client contracts
The variation of the two balance sheet items must be cumulatively analysed following the implementation of IFRS 15 (the standard was adopted without restating previous periods). Thus, an increase of 0.93% is noted as compared to the end of the previous year.
Assets related to client contracts represent the right of the Group to an equivalent value in return for goods or services transferred to its clients when such right is conditional upon something else than the passing of time. Before the transition to IFRS 15, these amounts were presented within trade receivables. These assets represent gas deliveries in December 2018 for which sale invoices are to be issued at the time specified in the contracts concluded between the Group and its clients.
Cash and cash equivalents. Other financial assets
Cash, cash equivalents and other financial assets (bank deposits and purchased state bonds) amounted RON 1,448.08 million on December 31, 2018 compared to RON 3,014.43 million at the end of 2017, the decrease being generated by distributing additional dividends, in 2018, to shareholders, besides the dividends for 2017. Thus, the value of total dividends allocated to shareholders in 2018 is RON 2.6 billion.
Other assets
The decrease in other assets is due to the recovering in 2018 of an amount of RON 113 million from the total receivables amounting RON 244 million recorded on December 31, 2017, representing excises on technological consumption for 2010-2016.
EQUITY
Group's total equity decreased by 15.25% (RON 1,371.4 million) in 2018 as compared to the end of 2017, due to distributing to shareholders, as dividends, the result of 2017 and part of the result of the previous years, in compliance with the resolution of the general meeting of shareholders of the Group. Additional dividends were distributed from Parent Company reserves in 2018.
Below are presented the elements that influenced the Group's equity in the years 2018 and 2017.
Description | Share capital | Legal reserve | Other reserves | Retained earnings | Total |
RON thousand | RON thousand | RON thousand | RON thousand | RON thousand | |
Balance as of January 1, 2018 (before change in accounting policy) | 385,422 | 77,084 | 2,235,448 | 6,635,380 | 9,333,334 |
Effect of change in accounting policy *) | - | - | - | (338,505) | (338,505) |
Balance as of January 1, 2018 (restated) | 385,422 | 77,084 | 2,235,448 | 6,296,875 | 8,994,829 |
Allocation to dividends | - | - | (716,886) | (1,923,258) | (2,640,144) |
Increase in legal reserves | - | 391 | - | (391) | - |
Allocation to other reserves | - | - | 185,563 | (185,563) | - |
Profit for the year | - | - | - | 1,428,383 | 1,428,383 |
Reserves from reinvested profit | - | - | 43,968 | (43,968) | - |
Change in accounting policies following adoption of IFRS 15 and IFRS 9 | - | - | - | (18,478) | (18,478) |
Other comprehensive income | - | - | - | (6,660) | (6,660) |
Balance as of December 31, 2018 | 385,422 | 77,475 | 1,748,093 | 5,546,940 | 7,757,930 |
*) In 2018 the Group voluntarily modified the accounting policy regarding recognizing the costs with seismic, geological, geophysical works and other similar operations. Pursuant to the new policy, these costs are recognized as expenses when incurred. Previously, these costs were recognized as intangible exploration assets. Information from previous periods was restated to ensure comparability to the current period.
Description | Share capital | Legal reserve | Other reserves | Retained earnings | Total |
RON thousand | RON thousand | RON thousand | RON thousand | RON thousand | |
Balance as of January 1, 2017 (before change in accounting policy) | 385,422 | 77,084 | 2,943,068 | 6,291,685 | 9,697,259 |
Effect of change in accounting policy *) | - | - | - | (321,662) | (321,662) |
Balance as of January 1, 2017 (restated) | 385,422 | 77,084 | 2,943,068 | 5,970,023 | 9,375,597 |
Allocation to dividends | - | - | (747,719) | (1,472,314) | (2,220,033) |
Increase to other reserves | - | - | 16,309 | (16,309) | - |
Profit for the year (before change in accounting policy) | - | - | - | 1,856,108 | 1,856,108 |
Reserves from reinvested profit | - | - | 23,790 | (23,790) | - |
Effect of change in accounting policy *) | - | - | - | (16,843) | (16,843) |
CB as of Dec 31, 2017 | 385,422 | 77,084 | 2,235,448 | 6,296,875 | 8,994,829 |
*) In 2018 the Group voluntarily modified the accounting policy regarding recognizing the costs with seismic, geological, geophysical works and other similar operations. Pursuant to the new policy, these costs are recognized as expenses when incurred. Previously, these costs were recognized as intangible exploration assets. Information from previous periods was restated to ensure comparability to the current period.
NON-CURRENT LIABILITIES
Long-term provisions decreased by 16.32% in 2018 as compared to 2017, especially due to a decrease in the decommissioning provision for wells that are going to be written off in the future.
CURRENT LIABILITIES
Total current liabilities decreased on December 31, 2018 by RON 323.2 million, as compared to the end of previous year, mainly due to the implementation of IFRS 15. Advances received from clients at the end of the period were presented in 2017 as trade liabilities including the amounts for deliveries made in December 2017, not invoiced before the end of the year. In 2018, these are presented net of the deliveries made in December 2018 for which advances were received from clients.
The increase in deferred income as of December 31, 2018 compared to 2017 is due to the collection of RON 20.99 million from the National Investment Plan for the CET Iernut new power plant. The subsidy will be recognised in profit or loss over the useful life of the plant built from this grant.
Preliminary Statement of Consolidated Statement of cash flow for the year ended December 31, 2018 (unaudited)
The consolidated cash flows registered during January-December 2018 and the similar period of 2017 respectively are as follows:
INDICATOR | Preliminary | Actual | |
December 31, 2018 (RON thousand) | December 31, 2017 (RON thousand) restated *) | Variation (%) | |
1 | 2 | 3 | 4=(2-3)/3x100 |
Cash flows from operating activities | |||
Net profit for year | 1,428,383 | 1,839,265 | -22.34 |
Adjustments for: | |||
Income tax expense | 230,421 | 322,905 | -28.64 |
Share from the associates' result | (622) | (1,375) | -54.76 |
Interest expense | - | 3 | n/a |
Unwinding of decommissioning provision | 26,175 | 18,621 | 40.57 |
Interest revenue | (53,279) | (22,350) | 138.38 |
Loss on disposal of non-current assets | 62,534 | 72,668 | -13.95 |
Change in decommissioning provision recognized in the result of the period, other than unwinding | (26,840) | 11,693 | n/a |
Change in other provisions | 30,366 | 11,389 | -166.63 |
Impairment of exploration assets expense | (118,809) | (45,100) | 163.43 |
Exploration projects written-off | 149,620 | 137,083 | 9.15 |
Net impairment of non-current assets | 197,565 | 23,206 | 751.35 |
Depreciation expense | 562,768 | 543,374 | 3.57 |
Depreciation of contract costs | 1,291 | - | n/a |
Impairment of investment in associates | - | (12,462) | n/a |
Net impairment of financial assets | - | (21) | n/a |
(Earning)/loss on financial investments at their fair value through profit or loss | 40,782 | - | n/a |
Loss on disposal of investments in associates and other financial investments | - | 12,308 | n/a |
Loss on trade receivables and other receivables | 20,048 | 38,575 | -48.03 |
Net impairment of inventories | (2,052) | 8,147 | n/a |
Income from prescribed debts | (58) | (610) | -90.49 |
Income from subsidies | (269) | (150) | 79.33 |
Cash generated from operational activities before movements in working capital | 2,548,024 | 2,957,169 | -13.84 |
Movements in working capital | |||
(Increase)/Decrease in inventories | 130,045 | 178,363 | -27.09 |
(Increase)/Decrease in trade and other receivables | (5,076) | (180,285) | -97.18 |
Increase/(Decrease) in trade and other liabilities | (195,481) | 105,975 | n/a |
Cash generated by operational activities | 2,477,512 | 3,061,222 | -19.07 |
Interest paid | (3) | n/a | |
Income tax paid | (334,324) | (309,956) | 7.86 |
Net cash generated by operational activities | 2,143,188 | 2,751,263 | -22.10 |
Cash flows from investing activities | |||
Acquisition of investments in associates | - | (144) | n/a |
Net collections/(payments) related to financial assets | 1,917,569 | 104,970 | 1726.78 |
Interest received | 49,338 | 20,909 | 135.97 |
Proceeds from sale of non-current assets | 961 | 207 | 364.25 |
Payments for purchase of non-current assets | (948,589) | (478,062) | 98.42 |
Payments for purchase of exploration assets | (205,371) | (233,231) | -11.95 |
Proceeds from disposal of associates | - | 298 | n/a |
Net cash used in investing activities | 813,908 | (585,053) | n/a |
Cash flows from financing activities | |||
Dividends paid | (2,638,535) | (2,220,003) | 18.85 |
Subsidies received | 21,108 | 413 | 5010.90 |
Net cash used in financing activities | (2,617,427) | (2,219,590) | 17.92 |
Increase/(decrease) in net cash and cash equivalents | 339,669 | (53,380) | n/a |
Net cash and cash equivalents at the beginning of the year | 227,167 | 280,547 | -19.03 |
Cash and cash equivalents at the end of the year | 566,836 | 227,167 | 149.52 |
*) In 2018 the Group voluntarily modified the accounting policy regarding recognizing the costs with seismic, geological, geophysical works and other similar operations. Pursuant to the new policy, these costs are recognized as expenses when incurred. Previously, these costs were recognized as intangible exploration assets. Information from previous periods was restated to ensure comparability to the current period.
CHIEF EXECUTIVE OFFICER | CHIEF FINANCIAL OFFICER |
Adrian Constantin Volintiru | Andrei Bobar |
1Romgaz Group consists of SNGN Romgaz SA ("the Company"/"Romgaz") as parent company, Filiala de Înmagazinare Gaze Naturale Depogaz Ploiești SRL ("Depogaz"), is the subsidiary owned 100% by Romgaz, and its associates SC Depomures SA (40% of the share capital) and SC Agri LNG Project Company SRL (25% of the share capital)