SNGN Romgaz : Transcript Conference Call S1 2023

CONFERENCE CALL

For the discussion of S1/Q2 2023 RESULTS

of ROMGAZ Group

August 16th, 2023

PARTICIPANTS:
Razvan POPESCU	Chief Executive Officer
Gabriela TRANBITAS	Chief Financial Officer
Marius VEZA	Accounting Department Director
Ion FOIDAS	Production Department Director
Dan PALIMARIU	Head of Gas Contracting, Transmission
	and Quantities Management

The Investor Relations Team

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PRESENTATION OF THE H1/Q2 2023 RESULTS

Conference Call with Investors and Analysts

August 16th, 2023

Good afternoon ladies and gentlemen,

Thank you for joining our conference call to discuss the results recorded by Romgaz Group in the First-Half of 2023.

We published the Board of Directors Report last Friday, which includes a detailed presentation of our economic and operational performance, the Consolidated Interim and Standalone Interim Financial Statements.

Also, an overall presentation of the group is available on our website, in the

"Investors" Section.

1. I will start by highlighting some aspects of the gas market environment in the First Half of 2023, compared to the same period of the previous year:

• We estimate that natural gas consumption in Romania dropped by 12% year-on- year, with imported gas volumes decreasing their weight to 14% - compared to 28% a year before;
• The Romanian Commodities Exchange recorded a weak liquidity as a result of the current regulation in force, and the Wholesale Average Price was lower by 19% year-on-year (these prices are considered as of the month of delivery for transactions concluded on this market segment);
• The average reference price on the Central European Gas Hub in the first 6 months recorded a decline of around 40% year-on-year according to data provided by the National Agency for Mineral Resources.

B. Regarding the gas & energy sector legislation in Romania, Romgaz activities continued to be influenced mainly by Government's Emergency Ordinance No. 27 - effective April 1st, 2022, subject to various subsequent amendments.

The Ordinance addresses the high gas and energy prices, and includes the following main provisions applicable to gas producers:

• REGULATED gas sales prices of 150 RON/MWh for the gas sold to suppliers of households (starting April 1st, 2022) and to heat producers and their suppliers - for the production of thermal energy for households (starting September 1st, 2022); the price of gas sold to the latter category was 250 RON/MWh only during Q2/2022;

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• The Ordinance also states that gas suppliers have CAPPED sale prices for some categories of end-consumers: maximum 310 RON/MWh (VAT included) for households, and maximum 370 RON/MWh (VAT included) for heat producers and for industrial clients with a consumption below 50,000 MWh in the previous year;
• For gas sold at regulated prices, starting April 1st 2022, producers' revenues are exempted from the Windfall Profit Tax. Gas Royalties are computed based on these regulated prices, instead of CEGH reference prices;
• As of September 1st, 2022, energy producers which started operations before this date, are required to contribute to the Energy Transition Fund the full amount exceeding 450 RON/MWh (certain deductions apply). In addition, gas and energy traders owe contributions to this fund for the profit in excess of 2% over the acquisition price;
• Gas storage is also mandatory for gas suppliers and heat producers to secure part of the estimated consumption of final clients during November 2023 - March 2024.
  In addition, Government Emergency Ordinance No. 186 issued in December 2022, imposed for 2022-2023fiscal years a 60% Solidarity Contribution applied to the amount of the annual taxable profit that exceeds by 20% the average value of taxable profits recorded during 2018-2021.

C. Regarding the operational and financial performance reported by Romgaz Group in the First Semester of 2023, we highlight the following results:

1. Natural gas production amounted to 2.38 bcm, lower by 5% compared to last year - but more importantly - approximately at the budgeted level and well below the national consumption drop of 12%.
   This was possible due to: output consolidation by streaming new wells into production as a result of successful exploration programs, rehabilitation projects in the main mature reservoirs, workover and recompletion operations to re- activate high-flows wells, and optimisation of wells operation by using modern techniques.
   As regards investments performed in our production facilities in the First-Half of 2023, I would like to point out that we finalised 1 production well, 1 well is in execution, and 5 wells in drilling-works procurement. Also, we completed 5 surface facilities, 14 facilities - are in construction, and other 25 - in different preparation stages. We performed recompletion, reactivation and capitalizable repairs for a number of 81 wells.
2. We hold a very strong position on the Romanian gas market: in the first 6 months of this year, our market share reached almost 48% of total deliveries in Romania, and 56% in consumption covered from domestically-producedgas, according to our assessments.

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1. Regarding "Gas Sales to third parties", volumes adjusted by 5.3% y/y, based on lower gas consumption in Romania, and lower volumes available for sale.
2. "Total Revenues from Gas Sold" amounted to RON 4.28 billion - with a decline of 36% year-on-year from the historical high value recorded last year. The drop came as a result of Romgaz obligation to sell over 86% of volumes at the regulated price of 150 RON/MWh in the First-Half of 2023, compared to only 4% in H1 2022.
3. "Revenues from Storage Services" added RON 287 million - up by 60% year-on- year, mainly due to higher revenues from capacity booking services.
4. "Revenues from Electricity" reached RON 200 million (compared to RON 499 million in H1 2022) - impacted by the requirement to sell almost the entire production at RON 450 /MWh, according to GEO No. 27/2022.
5. Overall, we recorded "Total Revenues" of RON 4.9 billion, 35% below the historical high value reported in the 1st Semester of last year.
6. On the expenses side, we underline that the 2 main taxes included in the
   "Other expenses" line in the P&L recorded a significant decline, with a positive effect on our profitability:
7. • "Windfall tax" decreased 5.6 times year-on-year to RON 645 million, due to the exemption for households and their significantly-higher weight in sales;
   • "Gas and UGS Royalties" dropped almost 3.2 times to RON 290 million, due to lower gas prices on CEGH, but, more importantly, due to higher sales at regulated prices than in H1 2022 (as previously mentioned, 86% of volumes sold were at regulated prices, as opposed to only 4% in H1 2022).

On the other hand, the Solidarity Contribution introduced in Q4 2022- which is recorded as an income tax expense - amounted to RON 971 million.

Altogether these 3 taxes represented a substantial expense of 1.91 billion RON, and accounted for 39% of Total Revenues in the First-Half of 2023 (compared to the 61% weight in the same period of 2022).

1. Gross Profit reached the historical high value of RON 3.01 billion - at a significant increase of 46% compared to last year.
2. Bottom line, Net Profit amounted to RON 1.69 billion, at a marginal decrease of 2% year-on-year- impacted by the Solidarity Contribution.
3. All Profitability Rates recorded a substantial performance in H1 2023:

EBITDA margin advanced to 64.5%, and EBIT margin at 59.2% - both rates being more than double year-on-year; net profit margin rose to the elevated level of 34.4%.

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