Crude news from the oil sector

Polish oil giants PKN Orlen and Lotos released their Q1 results last week, revealing below-forecast numbers. Both companies indicated that their disappointing results stemmed from one-off costs, and the market's reaction was muted.

Orlen reported a Q1 net profit of zł.49.2 million on sales of zł.13.7 billion, compared to zł.347.7 million on sales of zł.10.8 billion a year earlier. According to the firm, its results were handicapped by Mazeikiu Nafta, the Lithuanian refiner it acquired last December. Mazeikiu's multi-million-złoty operating loss resulted from continued difficulties caused by a fire at the facility last year. According to Orlen, Mazeikiu losses shouldn't have a significant impact on future earnings.

Lotos, the second-largest domestic oil firm after Orlen, reported a net profit of zł.56 million on sales of zł.2.54 billion, whereas it claimed a net profit of zł.102.9 million in Q1 2006, on sales of zł.2.7 billion. Higher reserve requirements and mechanical issues at Lotos' facility in Gdańsk were among the factors slimming the firm's profits. According to a statement made by the firm, "The events that caused the lower results in the first quarter of 2007 are mainly one-off events expected by the company."

The initial news disappointed investors - Orlen's share price immediately fell by four percent and Lotos' shares lost three percent. Both stocks quickly rebounded however, with Lotos gaining 0.76 percent on the day and Orlen losing around 0.36 percent. (Reuters)