Good afternoon, ladies and gentlemen, and welcome to our conference call for discussing the results recorded by Romgaz Group in the first three months of 2025. After introducing the speakers, Mr. Aristotel Marius Jude, Chief Executive Officer, will make an opening speech. Thereafter, the Q&A session will take place. Please be advised that this conference is being recorded for internal purposes. On behalf of the company, the following speakers attend this conference: Mr. Aristotel Marius Jude, Chief Executive Officer, Mr. Aristotel Jude, Deputy Chief Executive Officer, Ms. Gabriela Trânbițaș, Chief Financial Officer, Mr. Ion Foidaș, Production Department Director, Mr. Radu Moldovan, Energy Trading Director, and Investor Relations Department. Now, I would like to give the floor over to Mr. Razvan popescu , who will open the conference call with an opening speech.
Good afternoon, ladies and gentlemen. Thank you for joining our conference call to discuss the results recorded by the Romgaz Group in the first three months of this year. Yesterday, we released the quarterly report, which includes the presentation of our economic performance and the consolidated interim financial statements. Also, a presentation of Romgaz Group is available on our website in the Investor section. I would like to emphasize some aspects regarding the gas market environment and also to highlight the group's performance. Let me start with some aspects regarding the market context in the first quarter of 2025. According to our assessments, natural gas consumption in Romania rose by 2% to 41 TWh. Imported gas volumes recorded a significant increase of almost 70%, reaching a 21% weight in total consumption compared to a 13% weight in the first quarter of last year.
On the Central European Gas Hub, the average reference price increased by around 60%, according to the data provided by the National Authority for Regulation of the Mining, Oil, and CO2 Geological Storage Activities. On the Romanian Commodities Exchange, the wholesale markets, both spot and forward and balancing segments, recorded a similar trend in the first quarter of 2025, with a weak liquidity due to the regulation still in force. Regarding the fiscal environment, Romgaz activities continue to be influenced mainly by the government emergency ordinance number 27 that was issued in March 2022, that was subsequently amended and supplemented. The main legal provisions applicable to the gas producers include the regulated gas selling price of RON 120 per megawatt-hour for the gas hold to households and the supplier of households and to heat producers and their suppliers for the production of thermal energy for these households.
The price is applied during April 2024 and the end of March 2026. For comparison reasons, we still mentioned that in the first quarter of 2024, the regulated gas selling price was at RON 150 MWh . For the gas sold at regulated prices, payment of the windfall profit tax is exempt, and the gas royalties are computed based on the regulated prices instead of the reference prices. Regarding the operational and financial performance recorded by Romgaz Group in the first three months, we can point out the following aspects: natural gas production amounted to 1.29 BCM, adjusted only by 0.4% year-on-year, but higher by 0.6% compared to the Q1 average recorded over the past three years.
We achieved this performance through steady efforts aiming to consolidate and enhance our portfolio of onshore resources, which includes specific measures: the reactivation of 38 inactive wells through investment works, which improved our production by a little over 32 million cubic meters during this period. Ensuring the optimal operation of all gas compression and dehydration facilities, increasing productivity of wells operating below their potential flow rate, and also performing rehabilitation projects in our main mature gas fields. Also, in the first quarter, we performed drilling operation for one production well, finalized surface facilities to stream into production five wells, while other surface facilities are in execution to stream another 15 wells into production, and also reactivated and repaired a number of 47 production wells.
We can also underline that all these important measures led to a 64% increase in our condensate production to over 12,000 tons in Q1 this year, based mostly on the higher production level in our Caragele field. Regarding the Caragele commercial field, it stands now as the second largest field operated by Romgaz. In Caragele deep, we have the 76 Rosetti well in execution and the 54 Damyanka well with works awarded. The 78 Rosetti well was drilled and is waiting for testing, and other seven wells in different stages of drilling preparations. We continue to hold a strong position on the Romanian gas market. According to our assessments, Romgaz represents the leading gas supplier in Romania with a substantial contribution of 36% in total gas deliveries in the first quarter.
Also, we are strongly positioned in gas consumption covered from domestically produced gas, holding a significant share of 45% according to our estimates. We recorded total revenues from gas sold of over RON 2 billion, higher by 5% year-on-year compared to RON 2 billion in Q1 2024. Volume sold increased by 15%, while the average gas selling price recorded has multiplied, mostly due to lower regulated prices. Revenue from storage services were resilient at RON 136 million, with capacity reservation and withdrawal services weighing 54% and 44% respectively. Revenues from electricity improved by 3.5% to RON 113 million, mostly due to uncapped energy selling prices started with the 1st of January 2025. Production of our old power plant, which operates only one unit, declined by 24% year-on-year, but it brought its contribution to the security of supply in the energy market in Romania.
Overall, the Romgaz Group reported total revenues of RON 2.38 billion, elevated by 4.7% compared to the previous year, based on the contribution of the gas sales segment. On the expenses side, the windfall profit tax increased significantly over four times to RON 322 million, compared to just RON 77 million in Q1 last year due to a lower weight of household. Gas and new gas royalties decreased by 13% to RON 161 million, mostly due to lower gas production and prices. Altogether, these taxes, also including the duty to energy transition fund, increased significantly by 86% and represented almost RON 500 million expense compared to RON 267 million in the first quarter of last year, with a negative effect on our profitability.
Bottom line, we reported a net profit of RON 951 million, lower by 24% compared to the historically high value of RON 1.25 billion recorded in the first quarter last year. Nevertheless, we can positively emphasize that the net profit in Q1 this year exceeded 44% of the quarterly average recorded over the past three years. In the first quarter, profitability rates remained at substantial level: the EBITDA margin at 55%, EBIT margin 47%, and NP rate at 40%. On the CapEx side, Romgaz Group invested a total consolidated amount of RON 854 million in the first quarter. Investment in the Neptune Deep project represented RON 627 million, and Romgaz's own investment RON 223 million, mainly in exploration and production modernization, and RON 86 million in the Iernut power plant.
With regards to our flagship project, Neptune Deep, the progress recorded in Q1 is in line with the work program, budget, and with the execution calendar. The first gas production well of Neptune Deep project was spotted in the first quarter of 2025. This achievement represents the fulfillment of the development exploitation work programs for the commercial gas fields Pelican South and Domino. In addition to the drilling operation, work continues on various components of the Neptune Deep project. The production platform is under construction, systems for the subsea infrastructure are being manufactured, the support field vessels are being built, and the natural gas metering station is also under construction.
As a result of these significant developments, Romgaz and OMV Petrom are on track to safely deliver the first gas from Neptune Deep in 2027, and the project remains within the up to EUR 4 billion guidance of the total investment. Another strategic objective is a combined cycle gas turbine power plant in Iernut, for which we are now performing the remaining works to finalize the plant. At the end of April 2025, the total progress of the investment of the Iernut project, consisting of the execution of the initial works contract plus the execution of the new works contract, was approximately 98%. Related only to the new EPC contract, the total progress is at around 88%. Romgaz undertakes all efforts to support the contractor to ensure the investment progress is under finalization.
Nevertheless, among the drawbacks that we can mention is principally the difficult financial situation of the contractor, equipment problems that can arise during the tests required to put the plant into operation, extension of the deadlines to clean the circuits after the extended stay out of operation, the weak mobilization of companies specialized in the chemical cleaning of the pipes, and the need to repeat some tests to assess performance indicators for the P&I contract. With respect to the dividend distribution to shareholders, I would like to mention that on the 29th of April, the shareholders decided upon total gross dividends of RON 604 million, or a total gross dividend per share of RON 0.1568 per share. This results in a payout ratio of 20% for last year, which will allow Romgaz to partially finalize and finance its ambitious investment and development plans.
In the end of the presentation, I would also like to mention that on the 30th of April, we released the Romgaz Group consolidated sustainability statement for 2024. The statement was prepared in accordance with the relevant EU directive and the European Sustainability Reporting Standards. The statement provides sustainability policies, actions, and targets for Romgaz Group-owned operation, and also an assessment of impact, risk, and opportunities for the group operation on its value chain. It represents a very important tool for investors in Romgaz in both shares and bonds. With this, I'd like to close our presentation and also thank you for your attention and presence.
Thank you. Ladies and gentlemen, the line is now open to take the questions. I would like to remind you of the two options to address questions. Either raise the hand and turn on your microphone, or write a question. Ms.
Daniela Mândru, you may address your question.
Prices for the first quarter, and if it is possible to let us know what would be the volumes scheduled at cap prices for the full year. This is the first question. Please give us a hint how the first quarter results ended compared to the budget for the first quarter. The last question regards the Iernut. I've noticed, at least this is my feeling, that you are going to announce another delay in the completion of this project. Please let us know if my feeling is right. Thank you.
Thank you for the questions. For the entire year 2025, we expect around 83% of the entire volumes of gas to be sold at regulated prices. For the first quarter, we were mainly in line with the budget that we proposed.
For the Iernut power plant, indeed, your feeling is correct. Unfortunately, because of the situation that the EPC company is in, Duro Felguera, always when we come close to finalizing the project, it seems we always have to have another push. We managed to finalize a three-party agreement with the main subcontractor, which is General Electric, to be able to pay General Electric directly. We managed to close with another electrical company the same type of deal, and we are pushing the subcontractor to try and have the power plant to be put into function as soon as possible. As we said, yes, again, there will be delays in this already delayed project.
Thank you. Can you help us to understand, what is the new plan now? When will be?
Our plan is to try and support and push the EPC company to finish the project as soon as possible. This is the only plan that we can have. We are doing our utmost. We are trying to pay all subcontractors directly. We are trying to fund as much as we can as the project, given the legislative limits that as a majority stable company that we have. The main issue in this project is the fact that the EPC company went into, let's say, a preemptive insolvency procedure, and they did not have the cash flow to sustain part of the project. All of this cash flow is right now and is trying to be supported by Romgaz, of course, respecting the contract in place. We are very close to finalizing it. We have found some issues, for example, for the compressors.
We have to send some of them to Korea. They have been mended. They will be sent back to Romania. Of course, we will continue the testing in this respect.
Okay, thank you. Now, regarding the volumes at cap prices, please give us the absolute amount volumes. In the first quarter, how many terawatt hour? And for the full year, how many terawatt hour?
It should be around for 2025, around 41.1 TWh .
Sorry, I did not understand.
For the first, for the entire year, around 41.1 TWh .
Okay. And for the first quarter?
For the first quarter of 2025 or 2026.
2025.
Okay, thank you. This is all from my part.
We received a written question from Nikolaya. Thank you for your presentation. Nikolaya from Bete Capital Partners here.
I am curious about the % of natural gas sold at regulated price in Q1 2025, if that can be disclosed. Thank you.
Can you present your terawatt? Around 69% of the entire production was sold at cap prices in the first quarter of 2025.
The next written question from Mr. Tornay Marius Kalin. Will you succeed to commission by the end of the year Iernut power plant?
Yes. We are very involved, and we are in the last steps of doing this. We have had an enormous, let's say, mishap with the EPC company, but we are confident that we will be able to put it into production until the end of the year, in full commercial production.
The next written question from Mr. Christian Petre. Hi, can you comment on the level of windfall?
Yes, the level of windfall tax was higher because the gas that was sold on the ordinance 27 was low. Just 69% in the first quarter was sold at regulated prices versus over 94% in the first quarter of 2024. This was the difference. A lot more gas was sold at unregulated prices in the first quarter of 2025 versus the first quarter of 2024.
Another written question from Mr. Tornay Marius Kalin. Why did electricity production decrease in the first quarter as compared to the similar period of last year?
We needed to execute works on the Transelectrica station to connect the new Iernut power plant to the Transelectrica station. We could not do that with the old power plant still functioning. We had to stop the old power plant.
We also did repair works on the old power plant, but it needed to be stopped in order to make this connection with Transelectrica.
Another question from Mr. Tornay Marius Kalin. If you can follow up for the following projects, ERP for invoicing final customers and negotiations for Azomureș procurement.
We've prolonged the procurement for the final customers. We are still in the procurement phase and waiting to open the offers that we have in order to be able to hit our goal to be suppliers by the end of the year, given the fact that a lot of our production, so around 83% of our production, has already been sent on the ordinance to the suppliers and to the thermal energy producers. We think that end of the year should be an okay target to start the supply for households.
On Azomureș, we also started a procurement procedure to get a consultant to help us evaluate the Azomureș actives. Also, this consultant has to give us all the metrics regarding the Net Zero Industry Act and everything that Romgaz has to abide by given the Azomureș situation right now. We are in evaluation.
Another question from Mr. Tornay Marius Kalin. Did you progress with building the photovoltaic park you envisaged to build?
Yes, we are in progress right now. We've already opened the offers in procurement. We are penalizing these offers. We are in a technical phase of the evaluation, and it will probably end in the next 30 days. We will have a winner for our part in the next 30 days.
The next question from Laura Simeon. Could you disclose the price taken into consideration for gas royalties and windfall tax in Q1 2025?
Yes, royalties are computed at the regulated price for the quantities sold under the ordinance, so 120 liter per megawatt hour. For the quantities sold on the free market, the price was the one that we realized with those clients. As for windfall tax, we do not pay this tax on the gas sold under the ordinance.
The next question from Laura Simeon. When do you expect to make a decision regarding Azomureș?
Probably in the second half of this year.
Another question from Joanna Andrei. What is your current estimate for the gas volumes produced for this year? And also a guidance for electricity production.
For the gas production, we are following the strategic Romgaz plan, which is around to have a maximum 2.5% decline in our production. We kept production at a very respectable level in the first quarter due to the high demand in gas.
We are right now working on a lot of our fields, and we are doing repair works on some compressor station and the hydration station, but we are trying to keep production in line with last year's production or to have a small decline versus the production last year.
We received a question from Mr. Christian Petre. Hi, can you give some color on Azomureș takeover benefits for Romgaz?
The benefits are quite clear, given the fact that Azomureș is one of the biggest consumers of natural gas in Romania. It will give a lot of advantages for Romgaz to process its own gas, to add value to the gas that we are producing both from the onshore and especially the gas that will flow from the Neptune Deep project.
It's an important and a strategic, not only important, but a strategic factory in Romania that can have a lot of benefits in being inside the Romgaz Group.
Another question from Mr. Tamas Pletcher. Hello, what profit addition can come from the new Iernut power plant in 2026?
We expect a profit around EUR 10-15 million in 2026 from the plant.
Another question from Joanna Andrei. Can you please give us more details regarding the supply business in Moldova? What is the target here?
From the estimations that we have made in order to open the new subsidiary in Moldova, we are looking to be on the market. There is a maximum potential of 1 BCM, but we are in line, let's say, to have around 20-30% of gas being imported by the Moldovan state. This is where we have done some estimates around.
If you have any other questions. Ms. Daniela Mândru, please address your questions.
Yes, I have a question regarding the gas price evolution on the free market. Can you give us some hints on the—okay, we know the trend looks downward, but what would be an average price for the free gas market price this year, in your opinion?
It's very hard to pinpoint a price. You saw that we had movements in the TTF whenever there were, let's say, discussions surrounding an end to the conflict flow of gas to the EU. We are actually expecting a small decline on the average price of 2025 in the vicinity, somewhere 5%-10%. These are just estimation expectations by looking at the forward prices on the TTF market. It's very hard to know. Okay.
Just a curiosity, you mentioned that the import in Romania of gas increased significantly in the first quarter of the year. From where these imports are coming? What is the source of this gas, if you know?
The source of this gas, if you look at the Transgaz report, it showed that it's mainly coming from Bulgaria. It also came from Hungary in some days. So this is the source of the gas.
Okay. Thank you.
Thank you.
If you have any other questions, please feel free to address them. We received a written question from Mr. Tornay Marius Kalin. What are the destinations of the two bond emissions, of the two future bond emissions issues? Întrebarea este: care sunt destinațiile celor două emisiuni de obligațiuni viitoare?
This money will be used to finance Romgaz investment, to finance the Neptune Deep project, and to finance all other investments that Romgaz has.
A follow-up question from Mr. Tornay Marius Kalin. Shall these affect the size of the dividends distributed for the future?
The dividend policy, we always stress that it has to be a responsible one that will also allow our shareholders to have a dividend, have a dividend and cash flow, but also, and furthermore, to realize our very, very high investment plans to maintain the financial health of the company.
Another written question from Mr. Vladimir David. As it stands today, do we expect Neptune to start producing gas in the first or second half of 2027?
Production is on plan for 2027. This is the only thing that we can discuss right now. We are still in early stages of drilling.
Things are online. We are looking to be in line with the work and progressing with the work, but what we can discuss today is 2027.
Do you have any other questions? Ms. Daniela Mândru, please address your question.
I have a question regarding the budget. Please correct me if I'm not right. I'm reading what I wrote one month ago. You said that the company you budgeted that your gas sales to decline by 2.2% year on year. If you are judging by first quarter results, this assumption is questionable. The question is, do you expect the gas sales this year in terms of volume to increase or to decrease? Year on year, of course.
No, it's not questionable at all because it depends a lot on the consumption.
If we look at last year, the consumption in the first quarter was very different and much, much lower. Because we kept production at such a high level in the first quarter, we will probably have a small decline going forward this year. Right now, we do keep our sales in check and on budget. This is why the first quarter regarding the sales looked much better, because we tried to push to sell as much as possible, both because of the situation and both because of the demand and the prices.
The demand, probably you expect this decline in demand at the sector level, of course, to be induced not by prices, but because the prices on the free market are expected to decline, not significantly, but to decline. Do you expect a decline in the activity of these consumers?
Where from this pessimistic assumption on consumption in Romania?
This is our assumption that we started the year with, and no one was expecting the winter to last so long in such a cold February. If you look at the consumption in Romania in February, if you compare it, and also the first quarter, if you compare it to last year, it is very, very different. That is why we had, let's say, a much more pessimistic approach because we expected the weather to be much hotter and the consumption from the households not to be as high and also from the thermal plants. That is where the difference comes from.
Just for my curiosity, can you disclose in your budget what was the assumption of the gas sales in terms of terawatt-hours or in terms of whatever billion cubic meters, whatever you have?
We budgeted around 4.45 billion cubic meters.
4.45.
Okay. Thank you. Thank you. This is all from my part. Thank you for answering my questions.
If there are no further questions, we will conclude this conference call. Thank you for your questions. If you need further information, please contact our investor relations team. The conference is now concluded. On behalf of Romgaz team, thank you for attending today's conference call.