SNGN Romgaz : Transcript cf call H1 2022 Results 16 august 2022

CONFERENCE CALL

FOR THE DISCUSSION OF H1/Q2 2022 RESULTS

of ROMGAZ Group

August 16, 2022

PARTICIPANTS:
Razvan POPESCU	Chief Financial Officer
Andrei BOBAR	Finance Director
Marius VEZA	Accounting Department Director
Ion FOIDAS	Production Department Director
Octavian PAUNESCU	Exploration-Appraisal Director
Gabriela TRANBITAS	Head of Financial Reporting & Accounting
	Methodologies Department
Cornelia SARDAN	Head of Prices
Cornel CHERTES	Investment Project Management
The Investor Relations Team
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Mr Razvan POPESCU, CFO:

PRESENTATION OF H1/Q2 2022 Results

August 16, 2022

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 2022.

We released the Board of Directors Report last Friday, and this comprises a detailed presentation of our economic and operational performance, and the Consolidated 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 2022, compared to the same period of the previous year:

• We estimate that natural gas consumption in Romania decreased by 13% year-on- year, while imported gas volumes advanced and reached 29% of consumption.
  In Q2 alone, gas consumption declined by almost 19%, with imports maintaining a steady quarterly weight, according to our estimates. It is worth to note that compared to other European countries, Romania enjoys a high independence of gas imports, as consumption presently relies heavily on the domestic production.
• Regarding transactions on the Romanian Commodities Exchange, the Wholesale Average Price was higher over 5 times in H1 2022 compared to the same period of 2021; 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 also increased over 5 times year-on-year according to data provided by the Romanian Agency for Mineral Resources.

1. Regarding the gas & energy sector legislation in Romania, our activity was influenced by 2 main regulations in H1 2022: the GRP (Gas Release Program) and Governmental Emergency Ordinance no 27 / 2022.

1. In the GRP, according to ANRE's Order no 143 / 2020, large gas producers had the obligation to offer 40% of the previous year' gas production on centralized markets, with a minimum discount of 5% from the previous 60-daysaverage price of standardized products. The Program started on July 1, 2020, and was suspended

on April 1, 2022, by the GEO no 27 / 2022.

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1. The GEO no 27 / 2022 is effective during April 1, 2022 and March 31, 2023. Main provisions applicable to gas producers include:
2. • REGULATED selling prices of 150 RON/MWh for the gas sold to households, and 250 RON/MWh for the gas sold to heating plants to produce thermal energy for households
   • Exemption of Windfall Profit Tax for revenues from the gas sold at regulated prices, and computation of Gas Royalties based on these prices instead on CEGH prices.

Also, gas suppliers have CAPPED selling prices for some categories of final-clients, as follows: maximum 310 RON/MWh for households, and maximum 370 RON/MWh for power plants for the gas used to heat the households and for industrial clients with annual consumption below 50,000 MWh.

For the energy market, the Ordinance also imposes pricing norms, as well as an 80% windfall profit tax for energy producers during the application period.

C. Regarding the operational and financial performance reported by Romgaz Group in the First Semester of 2022, we can highlight the following results:

1. Natural gas production was 2.52 billion cm - exceeding by 2.3% the budgeted figure, and with only a marginal adjustment compared to 2021.
   We continue to consolidate our production through: exploration programs to stream new wells into production, production 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 technique.
   As regards investments in our gas production facilities in H1 2022: (1) we put into operation the Gas Dehydration Plant in Coşereni - an investment of RON 31 million, for the development of Snagov project; (2) we completed 1 production well, and design is in progress for 8 wells; (3) we finalized 9 surface facilities, other 7 are in construction, and 19 are in different preparation stages; and (4) we also performed recompletion, reactivation and repairs for 106 wells.
   In addition, the external audit of our gas portfolio that was performed by DeGolyer & MacNaughton, USA, was finalized at the end of June. The audit states total Gas Reserves of 65.9 bcm, and total Gas Resources of 55.9 bcm.
2. We increased ever more our already strong position on the gas market: our market share exceeded 43% of total deliveries in Romania, and 61% in consumption covered from domestic gas, according to our estimates
3. Regarding Gas Sales to third parties, volumes decreased by 8.9% y/y in H1, as a result of lower gas consumption in Romania. We mention that volumes traded in GRP were lower, impacted by the high-price environment, and status of Elcen
   Bucuresti and Elcen Constanta as "captive" clients had a negative effect as well.

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1. 1. Nevertheless, "Total Revenues from the Gas Sold" reached a historical height in
      H1 to RON 6.68 billion - almost 3.4 times year-on-year - due to a significant increase in our average realised gas selling price that overcompensated for the volumes sold.
   2. "Revenues from Electricity" added RON 499 million (compared to RON 43 million in H1 2021) due to higher production and favourable prices in the market.
   3. "Revenues from Storage Services" reached RON 180 million - higher by 46% year-on-year, mainly due to higher revenues from capacity reservation and injection services.
   4. Overall, we recorded "Total Revenues" of RON 7.50 billion, over 3.3 times higher year-on-year- at a historical record.
   5. On the expenses side, we can underline that (1) "Windfall Profit tax" increased over 17 times year-on-year to RON 3.67 billion (from RON 231 million in H1/2021), and (2) "Total Royalties" rose 5 times to RON 917 million;
      Altogether, these 2 taxes reached RON 4.59 billion (from RON 396 million in 2021). These accounted for over 61% of Total Revenues in H1 2022 (compared to 18% in H1 2021).
   6. Bottom line, we reported a record-high Net Profit of RON 1.73 billion, elevated by 127% compared to the same period of 2021.
   7. Profitability rates declined in H1 2022 as a result of the substantial tax expenses, but were still at favorable levels: EBITDA margin at 29.1%, and NP margin at 23.0%.
2. For Q2/2022 alone, we can highlight the following main results:
3. • Natural gas production edged up 0.02% to 1.21 billion cm
   • Total Revenues were higher 3.9 times to RON 3.57 billion
   • Net Profit was record high at 746 million RON, up 2.5 times year-on-year
   • Profitability rates continued to decline, with EBITDA margin at 26.8% and Net Profit margin at 20.9% - but still at favourable levels.
4. Regarding the strategic development of our company, the latest achievements are in line with the "Development Strategy for 2021-2030" that was approved by our shareholders on November 4, 2021.
   Our strategy includes as important objectives:
   o development of onshore blocks under concession, concession of new perimeters and exploitation of offshore gas in the Black Sea;
   o production of sustainable energy;

1. a minimum 10% reduction of carbon, methane and other gas emissions.

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