Orlen S.A. (PKN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Conference Call of ORLEN Group for the Third Quarter of 2023. Our speakers include Mr. Jan Szewczak, Management Board Member for ORLEN CFO; Armen Artwich, Management Board Member for Corporate Affairs. A very warm welcome to all our social media followers. Good afternoon. And let me now give the floor over to my fellow speakers.

Good afternoon, and a warm welcome to all of you at another conference call at which we'll summarize and recap the results of the third quarter, this time around of 2023. Let me start by a couple of general comments. With a couple of those comments, despite unfavorable events and the headwinds, especially in the wake of the pandemic and the effects and the aftermath of the pandemic as well as the war and very dangerous war in Ukraine, despite many unreasonable attacks, backlash targeted against Poland's biggest company, which was listed among 5 largest as well as 20 most developed and fast developing companies in the world. We have managed to build a strong multi-utility business. Some of you still -- some of those people still cannot understand that this is not the sales of fuels and service stations that actually generates this very solid results in terms of profit because the inflows from those services and the sales of fuels represent around 1% or 2% of our profits. And the lion's share of our profits actually come from other segments of our activities. So, we have managed to build a multi-utility business, which is profitable as well as we are able to take up unprecedented CapEx projects. We have managed to stabilize our financing sources. We have stabilized our finance footing and the balance sheet. And our shareholders are very much satisfied because we have paid out -- paid out in June this year, record high throughout our history, including the last 30 years of company, the highest dividend at nearly PLN 6.4 billion, which is a major injection to the budgets of our shareholders. As a result, we have financed a lot of mergers, including the consolidation with LOTOS and PGNiG. As I said, we have managed to build Europe's largest multi-utility business. And it's included and is ranked among world's biggest companies and we must do our best and our utmost, not to waste it in the future, not to -- or actually to tap into those opportunities and which follow from the success in the international scene and in the European scene, and this has never actually been achieved by any Polish company to date. As far as our strategy is concerned, we have created and updated actually the strategy in the first quarter of the year, the strategy by 2030, which assumes the spending and investment, which is a gigantic amount, half of the annual budget in terms of the entire state of Poland on the cost side, of which PLN 120 million, that is [ 30% to 40% ] will be spent on sustainable growth projects, low emission sources, the improvement in upgrade in terms of quality, our focus on climate change. At this point, I'd like to add that our CapEx year-to-date for the 9 months of 2023 represents more than PLN 20 billion. And this figure will actually grow as we speak. By the end of the year, it should increase to PLN 30-something billion in total. It is usually -- it's the fourth quarter that is usually a period in which investment actually accelerate investment activity actually accelerates. In the third quarter, ORLEN reported our performance figures, which were close to the previous period. We are talking about PLN 75 billion or PLN 75.4 billion in terms of revenue as well as PLN 8.2 billion LIFO-based EBITDA. Our cash flows came in, in the third quarter, came in at PLN 7.2 billion. And one comment at this point. If you want to compare those figures, then it's not -- it doesn't make sense to actually compare it to 2022. 2022 was an exceptional year in our history. Extraordinarily in terms of highest record-breaking results based on price shocks, abrupt and steep increases in terms of prices of gas, natural gas, diesel oil, gasoline all around the world as well as crude oil. These price shocks, supply shocks or also the aftermath of the war in Ukraine. So, it's very difficult to compare our performance to date in 2023 to 2022. I would rather focus on the comparison quarter-by-quarter or quarter-on-quarter this year, especially that in 2023, we have already seen certain signs of recession all across Europe. For instance, in Germany, our neighbors, but also in Poland, we see that the economic growth actually goes down and has been going down this year. In the past months, we have consistently focused on and delivered our churn, our projects in terms of transformation. We do not look at any adopted political calendars and time frames. We are consistent. We take care of our treasure that ORLEN is a national treasure. And we are very satisfied with this growth and this also translates into a lot of investments, especially in terms of Baltic Power Offshore project. We have taken or we have secured final investment decisions and it was also financed in the project finance formula. So, we are looking for a number of various ways to finance such large projects as Baltic Power. We have launched the construction of the installation terminal and we're still one of Baltic Sea's most advanced and state-of-the-art ports in terms of renewable energy sources. We signed an agreement for the purchase of other winds farms, additional wind farms, 68 megawatts located in Wielkopolska and West Pomeranian regions. As part of building the new transformational businesses or business areas and projects, we signed an agreement with Horisont Energi for the potential collaboration on one of the most advanced CCS, Carbon Capture Storage initiatives under Norwegian Continental Shelf. We're talking about very state-of-the-art and forward-looking project and we see a lot of potential here to tap in terms of savings, in terms of our future growth. We also signed an agreement on the cooperation with Yokogawa Europe. And this agreement focused on the integrated production system for synthetic fuels, which are an opportunity for us to or presented opportunity for us to achieve a total neutrality in terms of our fuels, mainly based on this -- actually is based on aviation fuels, but it has a lot of potential to tap and is very promising. And we also want to be one of the leading companies and countries that actually focus on this particular area like those as well. In terms of biofuels and shaping up, we launched the used oil -- used cooking oil, fatty acid methyl esters unit. This is a very environmentally friendly investment part of our group's strategy focusing on biofuels market. This is our future. The world has been using those products increasingly. And we do hope that with time, those fuels will -- waste fuels or waste products will gradually replace fossil fuels. Those esters that are produced and UCO FAME installation offer emissions, lower reduction of emissions lower by 84%. So, you can understand and see quite clearly that these projects are very environmental friendly and are focused on the quality of life of Polish citizens as well. We have already tested the first generally accessible hydrogen station in Poznan. And we also included the first hydrogen-powered locomotive into our fleet. So, the hydrogen projects in the hydrogen area is an apple in RI and we are focusing on this area as well. In the Retail segment, the main event, the key event here was the decision of the European Commission and the consent to purchase to 266 stations in Austria. So, we became one of the major players in Austrian market as part of the unification of our brand. We have completed the rebranding of nearly 90 fuel stations in Slovakia and we also launched another stage of rebranding in Germany. 100 ORLEN stations will be launched or brought onstream at the beginning of 2024 and the Germans see it and they recognize it and they estimate duly the quality and the level of the stations. As for part of our activities related to the crude throughput and upstream, we have finalized the strategic investment for the third nitrogen fertilizer production line. And we also launched the production from the Tommeliten Alpha in Norway by PGNiG Upstream Norway, our, as you know, ORLEN business in Norway. As a result, we will have around 0.5 billion cubic meters of gas per year and this gas will be supplied to Poland via the Baltic pipe -- pipeline. So, this presents an opportunity not only to step up on the production, but also to deliver gas to our customers in Poland. We also started the process of taking control of the Transit Gas Pipeline System. This is crucial to Poland's energy security. We also launched the biggest investment in our gas storage unit by focusing on the construction or reconstruction actually of the underground gas storage in Wierzchowice. And we also focused on the Floating Storage Regasification Unit, gasification unit, FSRU in the Gulf of Gdansk. We included 2 more LNG carriers to our fleet, the Swieta Barbara and Ignacy Lukasiewicz gas storage vessels. So, our fleet is growing as we speak and it will continue. We also signed an agreement to build a very modern oil mill at Ketrzyn, which will produce 200,000 tonnes of oils, which will be used to produce a low emission by oil fuels. This is a historical moment and a sign of times because in this region at Ketrzyn, we used to have a sugar production plant, which was privatized senselessly and then it was sold and closed down. At this very site, we are building a state-of-the-art modern oil mill plant. So, this is a proof that if you want to do something and achieve something, you can do it instead of selling out national treasures. So, this is a sign that we are effective in terms of the delivery of our strategies. We also signed a conditional share purchase for agreement at ENERGOP, the pipelines producers or pipeline element producers. We're talking about various fittings that are used in the construction of [ black pines ] for the refining and petrochemical segments. This transaction will increase our potential in terms of our industrial projects. So, we are talking about state-of-the-art cutting edge pipeline technologies and it shows that it's worthwhile to find partnerships to build a multi-utility business tapping into the experience and potential of smaller companies and ENERGOP is actually a very good example of that strategy. Me and Mr. Armen Artwich, we visited the company on the location and we are very happy to see that this company has joined our multi-utility group. Before moving on to our actual performance in the third quarter, traditionally, let me thank and extend our gratitude on behalf of Mr. Daniel Obajtek, President of Management Board and the entire Management Board, I'd like to thank all employees across the ORLEN Group, everybody who is involved in our work and all media representatives who are able to present our efforts in an unbiased way in our efforts that we take in order to build a modern and strong multi-utility group that is a strong player, both in Europe and around the world. Moving on to our macro environment, I'll give the floor over now to Mr. Artwich to discuss it, and I'll come back later to fuel consumptions. But first, let me give the floor over to Mr. Artwich.

Thank you very much. Focusing on the macro environment in the third quarter of the year, we must say that the third quarter was characterized by a great volatility of our parameters. Model refining margin went up by around 60% quarter-on-quarter as a result of higher margins on diesel oil and gasoline as well as heavy heating oil, as well as lower prices of gas. Our margins on diesel oil went up 6%, mainly on the back of planned stopovers of our units in India and in Europe, as well as lower supply dropping down the capacity by nearly 9%. The demand for diesel oil in Europe was higher and this was combined by lower restrictions in terms of transport and the export of -- and obviously, and the effect that it had on the export of products from Russia. The margins on gasoline went up, mainly based on lower supply as well as restriction and transport. We also saw certain gaps in the volumes of gasolines as a result of the closing down of the third largest refinery, Marathon Petroleum in Louisiana in the United States of America due to a fire. As a result, a change in the structure due to restrictions on the throughput on REBCO crude, the differential in third quarter came in at a negative value of minus USD 1 per barrel, which means that we pay a premium versus the quotation of conditions of Brent crude oil. In petrochemical business, our macro environment remains to be very challenging. The demand is low, which is driven by a slowdown in economy as well as high competition in terms of exports, especially from outside of the European Union. The quotations of Brent crude oil went up in the third quarter by 11% quarter-on-quarter. But went down, but the prices of gas in the stock exchange went down, which obviously had an impact on our production in Upstream segment. We also saw a relatively high PLN versus U.S. dollar and euro, which also had an effect on our business. This is a summary of a macroeconomic environment in the third quarter of 2023 and the data on the fuel consumption and GDP will be presented now by Mr. Jan Szewczak.

Thank you very much. Slide #6 presents data on fuel consumption and GDP. As you can see in the third quarter, we see clearly signs of economic slowdown apart from Slovakia and Lithuania, although in Lithuania, the increase at 0% or actually no increase is -- cannot be satisfactory to anybody. The dynamic across all markets shows major drops year-on-year. Also in German economy for the third quarter of the year and consumption of fuels in 2023 was higher and across all our home markets. A major increase in consumption up 10% year-on-year was reported for Poland and the Czech Republic. And in the quarters to come, in the periods to come, we expect an upward trend in terms of economy and increase in GDP. But obviously, this will depend on geopolitical situation, the developments in the Middle East in the context of war between Israel and Palestine. Slide #8 presents our financial results. We're showing revenues from sale at PLN 75 billion, which is a very strong figure going up by 3%. That is quite satisfactory. This increase in revenue was driven by higher sales volumes as well as higher quotations of refining products combined with low quotation of petrochemical products and hydrocarbons that exclude oil and gas. Our LIFO-based EBITDA operating profit came in at PLN 8.2 billion, going down by PLN 2.7 billion year-on-year, but let me repeat it. This is a misleading comparison. 2022 was an unprecedented year in terms of the scale of price shocks as well as international market volatility. This was mainly due to the result that we delivered in this quarter was mainly due to a negative impact of lower volumes, lower differential, lower trade margins, lower pet-chem margins. We remember the media demanded to drive down the margins. They were too high at that point. They are too low right now. It's very difficult to meet their expectations, the media expectations. What we are focusing on is the stability of the market and the availability of fuels for our clients. Obviously, hedging was also important, the strengthening of PLN versus U.S. dollars, lower in the third quarter as well as lower fuel margins, as I said before, in Retail, lower margins in Upstream as well. On the other hand, we also had higher overheads and labor costs. Our multi-utility business has grown. So, we had higher head count after the mergers. We believe that these figures, the results of consolidations with new companies included in the group and consolidated are on the positive side. And we also had lower reserves for CO2 emissions or provisions for CO2 emissions. And we must remember about the valuation of CO2 contracts and also the usage of historical inventory layers. In the third quarter, the LIFO effect came in at PLN 1.3 billion. which obviously impacted our EBITDA that we reported. As far as our financial result in the third quarter, we are talking about minus PLN 0.6 billion, which was mainly due to the negative effect of net FX differences, combined with the positive impact of net interests. And what is mostly interesting to you, the net result, it came in at a very solid level of PLN 3.5 billion and more than PLN 17 billion year-to-date. Let us keep our fingers crossed that the net result figures continue to be that solid. We had reported an EBITDA LIFO PLN 4.8 billion. This was a positive impact of consolidation. Obviously, we reported -- in the Refining segment, we reported EBITDA LIFO, which is lower by minus 5.5%, which is mainly due to consolidation of the PGNiG Group results. Corporate functions, we had higher costs by PLN 0.1 billion, which was due to the increase in the scale of ORLEN Group's operations. So, this is not a major increase compared to the scale that we have right now. In terms of more detailed results by segment, I'll now give the floor over to Mr. Armen Artwich to discuss it, starting from Slide #10.

On Slide #10, we present Refining segment's performance. EBITDA LIFO came in at PLN 1.9 billion, going down by PLN 5.5 billion year-on-year, mainly due to the negative macro impact, which were negative due to lower differential based on the change in the structure, higher or stronger PLN versus U.S. dollar and the negative impact of hedging. The above effects were limited by positive impact of higher refining margins, lower cost of other CO2 provisions. And obviously, we need to remember about the cost of CO2 provisions as well as the positive impact of the valuation of CO2 contracts. The negative year-on-year volume effect was due to the decrease in sales volumes as well as the change in the structure of processed crude oils that is the limitation of REBCO processing in the group and replacing it with more expensive grades of crude oil. In Poland, in the third quarter, we saw a visible negative effect of our shutdowns on a higher share of heavy fractions in the crude and the sales structure. We had a shutdown of Hydrocracking and FCC II as well as H-Oil and Hydrogen plant. Across the group, volume of sales went down by 2% year-on-year and the sales of diesel oil went down by 5%, LPG by 1%, heavy fuel oil by 11% year-on-year. We sold more gasoline by 10% and more aviation fuel by 19%. Other factors shaping our performance include lower performance by LOTOS as well as lower margins and higher overhead and labor costs, which were partially offset by the positive impact of the usage of historical layers of inventories. Moving on to operational data of the Petrochemicals (sic) [ Refining ] segment. Throughput was high. That's 10 megatonnes, which represents 94% of the usage of our capacity -- utilization of our capacity. Compared to last year, the throughput was down by 0.4 megatonnes. However, as we said, those periods are not comparable because in the third quarter of 2023 -- 2022, we consolidated the LOTOS Group. And we included 100% of their share in our utilization and throughput. And this year, we assumed a 70% share. At Plock, throughput was lower mainly due to maintenance shutdowns that I have mentioned. The refinery at Gdansk was producing at full swing, which translated into an increase in crude oil throughput year-on-year. At ORLEN Lietuva and Unipetrol, the figures stayed flat year-on-year. In the third quarter 2023, the volume of refining products came in at 8.8 megatonnes. We reported lower sales in Poland by 7% and by 18% and 37% in Czech Republic and Lithuania. The share of fuels across all our refineries was comparable year-on-year. Moving on to the Petchem segment. In the third quarter, we reported negative EBITDA LIFO at PLN 133 million, mainly due to the above-mentioned very unfavorable macroeconomic conditions for the Petrochemical segment, which translated obviously into lower margins for the majority of our petchem products. The negative effect was offset by stronger euro versus dollar, higher margins on fertilizers as well as the valuation of CO2 contracts. Volumes went up by 2% year-on-year 45,000 tonnes, mainly due to higher sales of fertilizers. The negative volume effect is mainly due to wood costs and the usage of natural gas as well as lower sales of olefins going down by 8%, PVC by 25% and PTA by 8% again. The volume went up by 7% in Poland. However, in the Czech Republic and Lithuania, it went down by, respectively, 4% and 50%. Others include the negative impact in the Petrochemical segment or lower trading margins year-on-year. In terms of the operational data for the Petrochemical segment compared to the last year, we had higher utilization ratio by 13 percentage points. Among others, it applies to the olefins unit and the Czech Republic. However, the olefins unit at Plock reported lower utilization and the same applies to the PC unit at Wloclawek. The sales in the quarter came in at 1.14 megatonnes going up by 2% year-on-year, mainly due to higher volumes in the sales of -- our sales, and the same applies to the sales of aromatics and polymers. Slide #14 presents the performance of the Energy segment. Our Energy segment reported more than PLN 1.3 billion in EBITDA, mainly due to the performance of Energa Group as well as ORELN S.A. units. There was a negative macro impact year-on-year, mainly in terms of electricity price hedging at Energa Group and ORLEN S.A, lower margins on electricity production at Energa Group, combined with higher distribution margins. The effect on spread of electricity versus gas prices and lower cost of CO2 provisions were obviously positive impact. We recognized a one-off provision at Energa Obrot. And the provision was at PLN 230 million, representing 75% of the total amount for 2023. The negative volume effect year-on-year results from lower production sales and distribution of electricity at Energa Group as well as lower production and sales of electricity at CCGT Plock as well as the CHP Plock combined with the negative impact of higher consumption of natural gas. Obviously, we need to remember about the positive impact of consolidation with PGNiG Group and certain dilution of Baltic Power shares. Those effects were partially offset by the price different payment fund at ORLEN S.A. and higher cost of transmission and transit fees year-on-year. In terms of the operational data of the Energy segment, in the third quarter, we produced 2.8 terawatt hours of electricity, of which 60% came from renewable energy sources and gas-fueled sources. Production of electricity, including the former PGNiG and LOTOS Group went down year-on-year by 13%, which was a result of the planned shutdown of CCGT at Plock and lower production output, the Ostroleka power plant. The distribution went down by 2% year-on-year, mainly due to lower consumption of energy across all our tariff groups, which was due to the incentives on energy savings. The increase in sales of electricity, which was noticeable, up by 3%, which is due to higher volumes traded on the wholesale market of our new trading company, ORLEN Energia that deals with the trading and energy. In terms of heat, heat sales came in at 12.9 petajoules, going down by 4% year-on-year, mainly due to higher average temperatures. On average, they were higher by 1.2 degrees Celsius. Moving on to the financial data for the Retail segment. The Retail segment in the third quarter 2023 reported EBITDA at PLN 601 million. And it was down by PLN 225 million compared to the third quarter of 2022. However, as Mr. Szewczak already said, you need to remember about the base effect. The third quarter of 2022 was exceptional, unprecedented in terms of the situation in the fuel markets in the Retail segment. We can say that this is an effect on a drop in fuel margins across all markets as well as higher costs of operation of all service stations due to inflation as well as an increase in the number of fuel service stations going up by 255. This is the total number of fuel stations that were included in the network. These effects were offset by higher margins on non-fuel products across all our markets. In terms of the operational data of the Retail segment, as I said before, sales volumes went up by 10% year-on-year. We also report -- especially reported higher sales in the Czech Republic and in Poland by 61% and 9% year-on-year, respectively, as well as in Lithuania going up by 6%. However, we reported lower sales in Germany by 4% year-on-year. The number of fuel stations at the end of quarter 3 came in at 3,153, which obviously represents an increase by 255 stations, as I said before, across all our home markets. In Poland and Hungary and Slovakia, this was due to the remedies, which we had to take in order to close the merger with the LOTOS Group. And in Slovakia, we launched rebranding on self-service stations that we took over. And in Germany, we launched self-service stations that we took over from OMB. The European Commission also gave a green light to buy additional 266 service stations in Austria. As a result, we will be one of 3 largest players in Austria, representing a great share of the market. Our market share increased in Poland, the Czech Republic and Slovakia and in Hungary and it stayed flat in Germany and in other home markets. We reported 2,596 non-fuel locations. In terms of the number of alternative fuel stations, it went up by 101 stations, came in at 701, of which we have also additional CMG and hydrogen stations. The number of ORLEN Paczka locations came in at more than 9,600. On Slide #18, we present the performance of the Upstream segment. In terms of EBITDA, it came in at minus PLN 212 million, going up -- going down -- I'm sorry, going down year-on-year by more than PLN 900 million. This is, as I said, due to the base effect and a major drop of prices of hydrocarbons. We're talking about the decrease of more than 80% for natural gas and 14% for crude oil year-on-year. In addition, we had to recognize a write-down for the price different payment fund at PLN 3 billion in the third quarter across the year. For the entire year, this write-down is supposed to reach PLN 14 billion, of which we also reserved the lion's share. The average production of hydrocarbons at ORLEN Group went up. We are talking about an increase of total average production of 124,800 barrel of oil equivalent per day year-on-year. We are talking about an increase in terms of crude oil and condensate and the data is presented on this particular slide. In the production of hydrocarbons compared to the previous quarter of the year, went down and the major drop of [ 6,1 thousand ] barrel of oil equivalent was reported for Poland. Lower production in terms of especially crude oil was the maintenance shutdowns in our fields. In total, our gas and crude oil reserves across the group is at [ 1,2 thousand ] barrel of equivalents per day. The average production came in at 154,000 of barrel oil equivalent per day. And we are showing the specific figures on this slide for Poland, Norway, Canada and Pakistan and Lithuania. In terms of the structure of our production, gas represents 74% and oil and condensate represented 26%. And I will now move over to our Gas segment. We generated EBITDA at PLN 5.2 billion, of which PLN 4.8 billion in trade and storage of gas and PLN 400 million for distribution. The retail tariff stays the same at about [ PLN 517 ], but due to decrease in average prices of gas across the world, we introduced lower prices for the sector of small and medium-sized enterprises. As a result, the average quarter for 1 megawatt hour was at around [ PLN 201 ], which was down versus June this year. Especially, we had to remember about lower cost of gas in the segment due to falling prices on the spot market and the monthly contracts compared to the third quarter of 2022, the price at TTF was lower by 84%. The average price of all transactions at spot and other transactions, we are talking about 276 megawatt per hour going down by 26% year-on-year. The average prices of gas transferred from production or Upstream segments to the Gas segment is also presented on this slide. In third quarter, PGNiG Obrot Detaliczny also received compensation from the price different payment found in the amount of PLN 1.5 billion. For our distribution activities, we generated solid EBITDA compared to the third quarter of 2022 before consolidation. Volume of imports of gas to Poland in the third quarter of the year came in at around 43 terawatt hours, of which 41% was LNG import. The sales of gas outside of the ORLEN Group went down year-on-year, mainly on the back of consolidation of companies. A large volume is now sold within the group. PGNiG Obrot Detaliczny, the figure also went down, mainly as a result of higher average temperatures and as a result, lower consumption of gas for heating purposes. For the perspective of the segment, we saw a good effect of sold prices. The volume of distribution remained comparable to the volume reported last year. We reported 99% in terms of our storage capacity. So, we're talking about very safe levels. We are very much ready for the heating season. At the end of the third quarter of 2022, it was comparable and came in at 98%. In terms of cash flows, I will give the floor over now to Mr. Jan Szewczak.

Thank you very much. And let me go back to our financial data, focusing first on our cash flows from operations and investments in the third quarter, we generated cash flows from investments -- operations, I'm sorry, at PLN 7.2 billion with a positive LIFO effect at PLN 1.3 million and a negative impact on the settlement of derivatives and minus PLN 1.2 billion. We paid taxes obviously, which has an impact, but we also had a change in provisions. We also had a settlement of grants for property rights at minus PLN 1 billion. We reported PLN 10.2 billion in terms of our spending and the effect of other cash flows mainly due to the purchase of CO2 emission allowances, property rights and the change in advance payments came in at minus PLN 2.6 billion. Year-to-date, for the 9 months of the year, we generated more than PLN 34 billion in EBITDA LIFO, operating profit. This shows the scale of our growth and our potential. And obviously, the fact that our decisions were well thought. The LIFO effect came at minus PLN 0.3 billion, working capital decrease came in at PLN 14.4 billion. CapEx represented more than PLN 20 billion year-to-date for the 9 months. And it all happened in the context of a payment of historically record high payout of the dividend. We also purchased CO2 emission allowances and property rights. We spent an enormous amount of PLN 8.2 billion. Had it not been for those obligations and spending figures, our performance would have been better. In total, in terms of all taxes, we paid more than PLN 51 billion year-to-date, which is a gigantic humongous amount. And we'll also have more spending, obviously. And at the end of the year, we'll probably be talking about more than PLN 60 billion. This is our obligation that we'll be paying in terms of taxes and an inflow to the Polish budget. As a result, our net debt went up by PLN 1 billion year-on-year, which is not a major increase in terms of debt. I'll talk about it later on. We can say that we can be sure and we can -- you can rest assure that our situation, financial situation remains very solid. Compared to the third quarter of 2022, our net debt in general, went down in terms of net debt by PLN 6.1 billion. As a result, at the end of the quarter, net debt amounted to PLN 1.3 billion. Quarter-by-quarter, our net debt increased by PLN 11.4 billion as a result of net outflow from investments at PLN 10.5 billion. The dividend paid out in the amount of PLN 6.4 billion, combined with net inflow from operations at PLN 7.2 billion. As far as the relation of our net debt-to-EBITDA covenant, which is obviously of much interest to all financial analysts, it was at the mere of 0.08x the acceptable level for the company, for the group and which is included in the strategy is at 2.5. This shows that we have the financial strength that we need. In terms of our finance sources, as I said before, they are well diversified with the average weighted maturity date in 2026. Something very important, I'd like to remind you of. Today our ratings from global institutions in terms of our investment grades include A3 with stable outlook from Moody's as well as BBB+ with a stable outlook from Fitch. So, the most renowned global rating agencies decided that our stability is very solid. In terms of our CapEx and our spending, you have to remember that if you don't invest, you'll go back, not only stop in your tracks, but you'll go back. So, we do not slow down our investment activities despite very high increase in terms of the cost of our CapEx projects and investments, an increase in the cost of feedstocks, labor costs and so on. We still believe that those processes need to be continued and we need to have a forward-looking strategy. So, our forecast of CapEx spending is at PLN 36 billion or PLN 30-plus billion because it all depends on the decisions that will be taken in the process, which is double the figure compared to the last year. So this shows you the scale of our growth. 70% of the amount will be spent on development projects, growth projects because we believe that this is the leverage that we need in order to grow in order to prosper. And this is also a guarantee for increasing the energy security and independence in terms of feedstock supplies for Poland. Obviously, the detailed list of the projects, CapEx projects are presented -- is presented on the slide. Year-to-date, our CapEx spending exceeded PLN 20 billion. And the split by segment is quite equal. I mean the Petchem, Upstream, Energy and Refining, obviously, we expect that CapEx spending will be increased in the quarters to come and the investments will be accelerated. In terms of our outlook for the macroeconomic environment and Mr. Artwich will now continue.

In terms of our macro environment in the fourth quarter of the year, the current quarter, we need to say that first of all, Brent crude oil price goes up by 6% quarter-on-quarter, mainly due to the conflict between Israel and Palestine, which obviously fuels the uncertainty in this very sensitive region in terms of the crude oil that is the Middle East. Obviously, this is also due to low reserves in the United States of America. Model refining margin went down by almost 40% year-on-year, mainly due to the negative effect of lower margins on diesel oil, gasoline and heavy fuel oil as well as higher prices of natural gas. The differential went down by USD 0.6 per barrel, down to minus USD 1.6 per barrel, mainly obviously due to the replacement of REBCO Russian crude oil with alternative, but higher crude oils from Norway, from the United States or Saudi Arabia. The margins, that is the crack for petrochemical products are going up slowly in the fourth quarter is very important, especially taking into account the above mentioned very unfavorable macro situation in the previous quarter for the Petrochemical segment. During our previous conference calls, we -- both me and Mr. Szewczak said that petrochemical market is cyclic in nature. But those cycles are unspecific because they are long cycles. We're talking about several or even more than 10 years in terms of cycles. So, slow signs of slowdowns are observed. The prices at TTF and also TGE gas prices go up and the strikes in LNG terminals in Australia, we are talking about macro environment. So, in terms of gas, this is a global market, even a strike at the gas terminal in Australia will increase the prices of gas prices also for the ORLEN Group. We also had a close down of the Groningen field, which is the largest gas field in Europe and a breakdown in the Baltic Connector between Finland and Estonia. According to media reports, this breakdown was was intentional. Moving on to our outlook, market outlook for the last quarter of the year. We expect the average crude oil price at about USD 80 per barrel. However, due to the conflict in the Middle East, the price in the short term may even go up to USD 90 per barrel. Our refining margin is expected at around USD 15 per barrel. The differential is expected at about USD 1.5 per barrel. The petrochemical margin is expected to go down by 20% year-on-year and we expect natural gas prices at around PLN 200 per megawatt hour and electricity prices at around PLN 500 per megawatt hour. For the entire year versus 2022, we expect the consumption of petrochemical products and fuels to go down, lower gas consumption, obviously due to energy crisis and high feedstock prices as well as reductions in terms of domestic consumption with comparable usage of electricity. This is a high effect of the high base last year. In terms of regulatory environment versus the previous quarter that we had, we saw no major changes which could impact our business to any significant extent. Thank you very much for your attention. And I do believe that we are now ready to move on to the Q&A session.

Thank you very much for this presentation and discussion of our financial and of our performance and results. And we'll now move on to the questions that we have been receiving. [ Mr. Vibyk ] of Salon24 asks, when service stations or fuel sessions in Austria will be brought onstream to your network?

We expect that the transaction will be finalized. I'm talking about, to remind you, 266 service stations under the Turmol brand. We expect this transaction to be finalized at the turn of 2023 and 2024. So, in just a couple of months, 2 months. The consent or the green light from the EC has already been given and will have -- will be present in the seventh market. In addition to a network of service stations, we're also taking over a network of electric vehicle charging stations and importantly, fleet card business. They are widely recognized -- broadly recognized in the Austrian market. So, at the turn of the year, we expect that this transaction will be completed and finalized.