Can't keep a good stock down
Leading Polish oil group PKN Orlen reported a surprise rise in third-quarter earnings last week to a record zł.1.03 billion. Net profits rose four percent from zł.985 million on the same period last year, defying analysts' expectations of a fall. Following the publication of the results, shares in the company surged by 7.2 percent.
Despite the upbeat reaction, investors are concerned about the company's planned $2.6 (zł.7.75) billion deal to purchase the Lithuanian Mazeikiu refinery. Although the European Commission gave consent for the deal last week, there remain concerns that supplies for Mazeikiu may not be stable. The refinery had its supply pipe to Russia cut after a reported oil leakage, and last week the refinery's technical director, Justinas Sestakauskas, said that there would be major delays in replacing a unit recently destroyed by the fire, which has severely cut refining levels. Revising previous estimates that it would take six to nine months to replace the damaged vacuum-distillation unit, Sestakauskas said repairs would take up to one year.
The delay has led to unrest on Mazeikiu's management board, and there are fears that the current Russian-controlled board might request the resignation of CEO Paul Nelson English, which might sink the Orlen deal. "One of the possible scenarios is that my replacement could potentially sign a very unattractive oil contract, a poison pill, which could jeopardize the deal," English told Reuters.
Similar discontent is being felt on Orlen's supervisory board. Last Thursday, following news that the Treasury Ministry plans to dismiss Orlen's chief executive Igor Chalupec, the board's head, Maciej Mataczyński, resigned in protest. "I highly value the performance of Mr President Igor Chalupec as well as the management board team under his governance. I am convinced that this team is capable of closing the transaction of acquiring Mazeikiu Nafta in a way that will increase both the shareholders' value as well as the energy security of Poland," Mataczyński said in a statement.
"Chalupec's mission is nearing its end. His dismissal will not harm the Mazeikiu refinery transaction," said Deputy Treasury Minister Paweł Szałamacha. The CEO is expected to go in the second half of November. (Reuters)
