HELLENiQ ENERGY — A good quarter, but softer margins expected in Q3

HELLENiQ ENERGY (ASE: ELPE)

Last close As at 25/09/2024

EUR6.99

0.00 (0.00%)

Market capitalisation

EUR2,137m

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Research: Oil & Gas

HELLENiQ ENERGY — A good quarter, but softer margins expected in Q3

HELLENiQ ENERGY’s Q224 results showed a continuation of Q124 trends, with refining margins trending down but increased year-on-year oil prices and operational improvements driving sales and earnings growth. Q2 sales of €3,274m were up 9.9% y-o-y, adjusted EBITDA of €232m was up 42% y o y and adjusted net income of €73m was up 192% y-o-y. The Q224 HELLENiQ benchmark margin declined to $5.5/bbl, from $8.8/bbl in Q124, but was above the $4.4/bbl achieved in Q223. The company noted that the Q324 estimated refining margin has averaged $3.9/bbl, which is lower than Q224, and management expects a more normalised H224.

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Written by

Nick Paton

Oil & Gas

HELLENiQ ENERGY

A good quarter, but softer margins expected in Q3

Q224 results

Oil and gas

10 September 2024

Price

€7.13

Market cap

€2,179m

Net debt (€bn) at 30 June 2024

1.59

Shares in issue

305.6m

Free float

28.4%

Code

ELPE

Primary exchange

Athens

Secondary exchange

LSE

Share price performance

Business description

HELLENiQ ENERGY (formerly Hellenic Petroleum) is a leading energy group located in South-East Europe. The company offers a range of products and services from refining and trading of petroleum products, petrochemicals manufacture and fuel marketing. The group is building a portfolio of low carbon products and services such as electricity generated from renewable energy sources, hydrogen and biofuels.

Analysts

Nick Paton

+44 (0)20 3077 5700

Andrew Keen

+44 (0)20 3077 5700

HELLENiQ ENERGY is a research client of Edison Investment Research Limited

HELLENiQ ENERGY’s Q224 results showed a continuation of Q124 trends, with refining margins trending down but increased year-on-year oil prices and operational improvements driving sales and earnings growth. Q2 sales of €3,274m were up 9.9% y-o-y, adjusted EBITDA of €232m was up 42% yoy and adjusted net income of €73m was up 192% y-o-y. The Q224 HELLENiQ benchmark margin declined to $5.5/bbl, from $8.8/bbl in Q124, but was above the $4.4/bbl achieved in Q223. The company noted that the Q324 estimated refining margin has averaged $3.9/bbl, which is lower than Q224, and management expects a more normalised H224.

Year end

Revenue (€bn)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

9.2

407

1.1

0.1

6.5

1.4

12/22

14.5

1,420

2.9

1.2

2.5

16.8

12/23

12.8

604

1.6

0.9

4.5

12.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

The Q224 results were broadly in line with the company’s previous guidance. However, despite the seasonality, the Q3 to date estimated benchmark refining margin stands at $3.9/bbl, lower than the $8.8/bbl and $12.6/bbl system margins calculated for Q124 and Q323, respectively. HELLENiQ managed to drive a 9.9% yo-y increase in Q2 sales and an adjusted EBITDA increase of 40.6% yo-y, while Q224 adjusted net income improved to €73m from €25m in Q223.

HELLENiQ’s Refining, Supply & Trading business saw a strong quarter, with adjusted EBITDA of €179m, up 57% y-o-y. The business unit generated 77% of group adjusted EBITDA in Q2. Management highlighted that the results were supported by high utilisation and production during the quarters, but noted that there was a ‘temporary slowdown’ in refining margins in Q3, compared to Q323. The Marketing segment saw Q2 EBITDA rise 13% y-o-y to €32m. This was mostly due to a domestic business that saw volumes up 2% y-o-y to 995,000 tonnes, sales up 13% y-o-y to €839m and reported EBITDA rising 2%. However, excluding inventory valuation effects, adjusted EBITDA actually fell by 13% y-o-y to €12m. HELLENiQ’s Renewables segment generated EBITDA of €12m in Q2, up 7% y-o-y.

Management continues to focus on expanding the Renewables business and confirmed its target to hit capacity of 1GW by end 2025, with capacity reaching 0.38GW at the end of Q224, compared to 0.36GW at end Q223. Long-term guidance remains to have 2GW in place by 2030. The company also commented on its exploration activities, noting that it expected to make a decision on its Greek offshore blocks in the next six months. Additionally, HELLENiQ has performed significant restructuring internally, with changes to the board of directors and a material reorganisation of its human resources function. We remain attentive to industry refining margins. According to management, one of the positive things to expect in the near term is the market maintenance period removing approximately 1m bbl/d capacity, as well as increased seasonal demand.

General disclaimer and copyright

This report has been commissioned by HELLENiQ ENERGY and prepared and issued by Edison, in consideration of a fee payable by HELLENiQ ENERGY. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by HELLENiQ ENERGY and prepared and issued by Edison, in consideration of a fee payable by HELLENiQ ENERGY. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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