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Orlen to focus on buying oil fields, not refiners

PKN Orlen SA, Poland's largest oil company, will focus on buying its own oil fields, aiming to seal one deal by the end of the year, rather than trying to buy refining and retail assets in neighboring countries.

Orlen is in talks on several oil production projects, CEO Piotr Kownacki said at a news conference in Warsaw yesterday, adding that Kazakhstan is a main area of interest. For the next two years, Kownacki doesn't see any chance of acquiring other refiners in the region. The company is buying Lithuania's AB Mazeikiu Nafta for $2.5 billion. „I would be happy if we could close one very good project by the end of the year,” he said. Orlen's strategy calls for it to acquire stakes in oil-extraction companies, producing 400,000 tons of oil this year and 4.3 million tons annually by 2015. The state-controlled company currently doesn't produce any of its own oil. Poland's government wants to cut energy dependence on Russia, which supplies more than 90% of the country's oil. „This is a step in the right direction; it's good that the new CEO is continuing this” plan to develop oil fields, said Ludomir Zalewski, an analyst at PKO Bank Polski SA's brokerage. Kownacki said his planned program of „margin optimization,” changing Orlen's management style to concentrate on the earnings of the company as a whole rather than those of specific units, could reduce costs by about 5% within two years. „This is a significant reduction, but the question is: where are the specifics?” said Flawiusz Pawluk, an analyst with the brokerage of Bank Zachodni WBK SA. „The market will definitely be waiting for more details.”

Mazeikiu may report a profit in the Q4, its first since a fire in October cut output to about 15,000 tons a day from 27,400 tons, Kownacki said. The company remains unprofitable after repairs announced last week restored about half the lost capacity. „In the best-case scenario, Mazeikiu can return to profitability in the last quarter of this year,” Kownacki said. The company also sees „many arguments” for not paying a dividend on 2006 net income, the chief executive said. Kownacki, who became company chief last month, also said he „has no negative opinion” on any board member, adding that the final decision on any changes belongs to the supervisory board. Gazeta Prawna, citing an unidentified person familiar with the government's personnel plans for state-controlled companies, reported yesterday the company would remove Jan Maciejewicz and Cezary Smorszczewski from the management board next month. (Bloomberg)