Hellenic Petroleum — Improved environment, new strategy drive growth

HELLENiQ ENERGY (ASE: ELPE)

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Research: Energy & Resources

Hellenic Petroleum — Improved environment, new strategy drive growth

Following a weak H119 due to an unfavourable trading environment for refineries, Hellenic’s profits picked up in Q3. We continue to expect strong growth in FY20 driven by higher refining margins, including the impact of IMO 2020. The strategic update presented at the investor day focused on the growth potential from efficiencies and new investments. We believe the strong cash flow supports both the healthy dividend and capex plan, and investments in the core refining business look particularly attractive.

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Written by

Energy & Resources

Hellenic Petroleum

Improved environment, new strategy drive growth

Q3 results and investor day

Oil & gas

18 November 2019

Price

€8.70

Market cap

€2,659m

Net debt (€m) excluding IFRS 16 liabilities at 30 September 2019

1,509

Shares in issue

305.6m

Free float

19%

Code

HPI

Primary exchange

ASE

Secondary exchange

LSE

Share price performance

%

1m

3m

12m

Abs

3.8

(3.7)

15.1

Rel (local)

0.6

(13.1)

(18.0)

52-week high/low

€9.55

€6.94

Business description

Hellenic Petroleum operates three refineries in Greece with a total capacity of 341kbd, and has sizeable marketing (domestic and international) and petrochemicals divisions.

Next events

Ex-dividend date
(interim DPS of €0.25)

7 January 2020

FY19 results

27 February 2020

Analyst

Dario Carradori

+44 (0)20 3077 5700

Hellenic Petroleum is a research client of Edison Investment Research Limited

Following a weak H119 due to an unfavourable trading environment for refineries, Hellenic’s profits picked up in Q3. We continue to expect strong growth in FY20 driven by higher refining margins, including the impact of IMO 2020. The strategic update presented at the investor day focused on the growth potential from efficiencies and new investments. We believe the strong cash flow supports both the healthy dividend and capex plan, and investments in the core refining business look particularly attractive.

Year end

Revenue (€m)

Adjusted EBITDA
(€m)

P/E*
(x)

Net debt
(€m)

DPS
(€)

Yield
(%)

12/17

7,995

833

5.4

1,802

0.40

4.6

12/18

9,769

730

8.0

1,460

0.75**

8.6**

12/19e

9,113

645

10.6

1,391

0.50

5.7

12/20e

9,264

806

7.3

1,174

0.50

5.7

Note: *EPS is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Includes €0.25/share special dividend from DESFA sale.

Investor day highlights attractive capex potential

At its investor day, Hellenic Petroleum provided an update on its growth plans and on the expected impact of the upcoming IMO 2020. On our estimates Hellenic’s strong free cash flow generation is sufficient to finance both the capex plan and the payment of an attractive dividend (we forecast 5.7% yield in FY20). The investments to upgrade the core refinery assets appear the most attractive in our view, with €220m capex driving an increase in EBITDA of €130–175m (based on company guidance) implying a payback period of <2 years. We also expect a more favourable environment for the refining business and we continue to believe Hellenic Petroleum is well-placed for IMO 2020 given its high middle distillate yield, minimised fuel oil output and above average complexity and crude slate flexibility.

Q319 shows significant recovery

There was a strong q-o-q recovery in profits in Q3, as refining margins normalised following historic low levels in H119. However, EBITDA was still 15% lower y-o-y and was below our expectations. We have reduced our forecast for FY19 EBITDA by 5% to reflect a weaker Q3 than previously expected, although our refining assumptions are broadly unchanged for Q419 and FY20. The negative impact from lower refining profits is offset at the bottom line by reduced financing costs as we have better incorporated the impact of the recent bond transactions, with the issue of a €500m bond with a modest 2% coupon. Overall our adjusted net income forecasts are little changed.

Valuation: In line earnings multiples, strong FCF yield

Despite its strong industry positioning, Hellenic trades in line with its European peers on EV/EBITDA (5.3x FY20e vs European peers on 5.0x) and P/E (7.3x FY20e, in line with the sector). The average free cash flow (FCF) yield of c 18% before growth capex in FY20–21 (assuming no significant variations in working capital) is strong and significantly above peers. Our valuation, based on a blend of DCF, EV/EBITDA and P/E values, is broadly unchanged at €9.3/share.

Improved environment and new strategy drive growth

Hellenic Petroleum reported a strong q-o-q profit recovery in Q3, as refining margins normalised following historic low levels in H119. At its investor day, Hellenic Petroleum provided an update on its growth plans and on the expected impact of the upcoming IMO 2020. We continue to believe that Hellenic Petroleum is well-placed for IMO 2020 given its high middle distillate yield, minimised fuel oil output, above average complexity and crude slate flexibility. On our calculations, the company’s strong cash flow generation supports both dividend payments (we estimate c 6% dividend yield in FY19/20) and the growth capex plan (€700m growth capex to achieve its medium-term target of >€1bn EBITDA).

Q3 results strongly recovering q-o-q

In Q319, Hellenic Petroleum reported a significant profit recovery q-o-q, after H1 results were hit by record-low refining margins due to disruption to the availability of Urals oil and weaker cracks for most products. However, Q3 EBITDA of €201m was 15% lower y-o-y (2018 was a record year for the company) and below our expectations (€244m), due to lower margins and higher costs than we expected. The company guidance of €600–650m EBITDA for FY19 was also below our previous forecast of €683m. Key highlights were:

Q3 adjusted EBITDA was €201m, down 15% y-o-y but implying a significant recovery vs Q119 (€123m) and Q219 (€130m), as the refining business recovered, driven by improved refining margins, a stronger US dollar vs the euro and Russian crude oil supplies resumed in central Europe. EBITDA was however affected by scheduled shutdowns and IMO test runs. In H119 refining margins were at their lowest level in five years and there were problems with Russian crude supplies into Europe. The contamination of large quantities of Russian crude oil in the Druzhba pipeline, which supplies central and eastern European countries, disrupted the supply of Russian crude for most of Q219, affecting the availability and pricing of Urals oil. Margins recovered in Q3 (Exhibit 1) and at the beginning of Q4 the margin recovery continued for Elefsina while margins for Thessaloniki deteriorated. Petrochemicals EBITDA was lower y-o-y due to lower volumes and margins while EBITDA for domestic and international marketing activities were higher y-o-y driven by increased volumes and the positive accounting impact of IFRS16.

Exhibit 1: Evolution of Med benchmark refinery margins

Source: Company data

Finance costs reduced: Financial expenses were €27m/quarter in Q3 vs €32m/quarter in Q1 and Q2. Hellenic Petroleum guided for a €15m reduction in finance costs on an annual basis from Q419 due to the replacement of existing bonds with a lower-cost issue. At the end of September 2019, Hellenic Petroleum issued a new €500m five-year bond with a 2.125% yield (2% coupon). Hellenic Petroleum said it received strong demand for the issue with an order book of €1.4bn (more than 50% from international investors) and as a result it increased the size of the issue to €500m (from €400m). The new bond replaces a much more expensive €325m bond issued in 2014 with a coupon of 5.25%, which was repaid at the beginning of July, as well as a bond due to mature in 2021 with a coupon of 4.875% (this was a partial refinancing, with €248m accepted tenders through a tender offer that ran in parallel with new issue).

Adjusted net income was down 19% y-o-y to €90m, due to lower EBITDA, partly offset by a reduction in financial expenses and a lower tax rate.

Net debt (excluding IFRS16 lease liabilities of c €180m) was €1,509m, down 15% y-o-y due to cash flow generation and the disposal of DESFA at the end of 2018.

Investor day highlights opportunities from new strategy and IMO 2020

At its investor day, Hellenic Petroleum provided an update on its strategy including its growth initiatives and efficiency targets as well the forthcoming impact of IMO 2020.

Free cash flow appears to support both growth investments and dividends

The company’s main target is to grow EBITDA to >€1bn in the medium term (2020–25, excluding the positive impact of IMO 2020), which compares to its guidance for FY19 of €600–650m. The growth is driven by efficiency gains (digitalisation and energy/procurement/organisation efficiencies), investments in organic growth (including the increase in polypropylene capacity) as well as investments in new businesses (in particular the investments in 300MW renewables; more may follow thereafter). Hellenic Petroleum plans €700m growth investments to achieve the >€1bn EBITDA target. The investments to upgrade the core refinery assets are the most attractive in our view, with capex of €220m increasing EBITDA by €130–175m pa (based on company guidance), implying a payback period of <2 years. The investments in renewable activities may provide a new area of growth for Hellenic Petroleum but there are execution risks, particularly if it considers growing by acquisition; in addition, in our view, returns for renewable projects are likely to remain under pressure due to significant competition. However, according to the company, the investments in renewables offer an opportunity for cash flow diversification/increased stability due to the lack of correlation with the refining business and their low volume/price risk. Hellenic Petroleum targets competitive returns on equity from renewable investments and the company sees synergies with the rest of the business. Renewable investments provide an opportunity to integrate the current operations with a low-carbon business and Hellenic Petroleum targets a reduced risk profile for the group thanks to hedging of both short-term (carbon prices) and long-term risks (fossil fuel decline).

We believe Hellenic Petroleum’s strong free cash flow generation is sufficient to finance its capex plan and allow for dividend payments. We estimate c €450m/year average FCF pre-growth capex in FY20–21 (assuming no significant variation in working capital), which should support both a dividend payment of c €230m/year (our forecast) and growth capex (the company estimates €100–150m/year).

IMO 2020: It is time to switch

Hellenic Petroleum provided an update on the impact on its operations of the new IMO 2020 regulations. Based on the expectation that there will be a high level of compliance, 2–3 million barrels per day of sulphur fuel oil (HSFO) demand (or c 20% of global demand) will be replaced by ultra-low sulphur fuel oil (ULSFO) and marine gasoil (MGO) consumption. Hellenic plans minimal changes to crude processing at Elefsina and Thessaloniki ahead of IMO 2020 as neither refinery produces HSFO. However, Aspropyrgos presents an opportunity to reduce high sulphur feed and replace it with lower sulphur crudes, switching current output from 24% HSFO to just 4% HSFO. The company said that the test runs for Aspropyrgos were completed successfully and the switch to the new operating mode is expected in the second half of November. Hellenic Petroleum has tested various market scenarios and the most positive earnings impact for the company is expected in case of strong marine gasoil demand, while a scenario of strong VLSFO demand would be less positive due to lower refinery utilisation and margins.

In anticipation of IMO 2020, HSFO cracks reduced q-o-q in Q319, while cracks for middle distillates increased, as shown below. We believe this trend is likely to continue in Q4 and beyond.

Exhibit 2: Spread between ultra-low sulphur diesel and high-sulphur fuel oil

Source: Company data

We expect benchmarks to improve in 2020 due to IMO 2020, although in the longer term this is offset by the impact of global refining capacity additions, on our assumptions. We continue to believe that Hellenic is well-placed for IMO 2020 given its high middle distillate yield, minimised fuel oil output, above average complexity and crude slate flexibility. We assume an average margin outperformance of $5.7–5.8/bbl (unchanged) relative to Hellenic Petroleum’s benchmark in FY19 and FY20 (this is relative to FY18’s outperformance of $6.2/bbl and $5.75/bbl in 9M19). We have conservatively assumed a fairly moderate impact from IMO 2020 (c $0.5/bbl), reflecting an increase in realised margin in the period beyond Q419 as a result of increased middle distillate demand, but we believe there is upside potential to our forecasts. However, there is still significant uncertainty with regards the precise margin impact given unknowns such as compliance, scrubber installations, relative crude discounts and refinery flexibility. Please see our outlook report for more details of the impact of IMO 2020. While the variation in refining margins is a key driver for Hellenic Petroleum, it is important to point out that most of the company’s profitability (75% of FY18 EBITDA) is independent of the refining benchmark.

Exhibit 3: Historical and Edison assumptions for Hellenic Petroleum refinery margins

Source: Company data, Edison Investment Research

Forecasts: Lower EBITDA and interest expenses

We have reduced our FY19 EBITDA forecast by 5% to reflect the weaker Q3 than previously expected, but we have broadly maintained our refining assumptions for Q419 ($4.6/bbl in Q419 vs $3.3/bbl for 9M19) and FY20 ($4.6/bbl). The negative impact from lower refining profits is offset at the bottom line by lower financing costs as we have better incorporated the impact of the recent bond transaction. Overall, our adjusted net income forecasts are little changed. We have also increased our net debt forecasts to reflect broadly flat working capital (vs a positive variation before).

Exhibit 4: Forecasts changes

Actual

Edison (new)

Edison (old)

Difference

Year-end December (€m) 

FY18

FY19e

FY20e

FY19e

FY20e

FY19e

FY20e

Adjusted EBITDA, refining

543

412

566

453

580

-9%

-2%

Adjusted EBITDA, petrochemicals

100

106

107

106

106

0%

0%

Adjusted EBITDA, marketing

93

139

142

134

138

4%

2%

Other

(2)

(7)

(8)

(10)

(8)

Total adjusted EBITDA

730

645

806

683

817

-5%

-1%

Associates

(2)

13

10

15

10

Adjusted EBIT

533

417

560

452

579

-8%

-3%

Finance costs

(146)

(113)

(84)

(130)

(116)

Adjusted net income

291

251

364

255

355

-1%

3%

Source: Company data, Edison Investment Research

Valuation broadly unchanged at €9.3/share

Despite the adverse environment for the refining business in 2019, Hellenic Petroleum’s share price is up c 20% ytd driven by a strong reduction in Greek country risk (with the yield of the 10-year Greek government bond falling 300bp to an all-time low) mostly thanks to the election of a new pro-market government. However, Hellenic Petroleum has underperformed the wider Greek stock market (c +40% ytd).

Despite its strong industry positioning, Hellenic trades broadly in line with European peers on EV/EBITDA (5.3x FY20e vs its European peers on 5.0x) and P/E (7.3x FY20e, in line with the sector). The company’s free cash flow generation is strong and significantly above peers with an average FCF yield of c 18% before growth capex in FY20–21 (assuming no significant variations in working capital).

Our valuation, based on a blend of DCF (€10.6), EV/EBITDA (€8.4) and P/E (€10.6) valuation approaches, is broadly unchanged at €9.3/share vs €9.2/share previously. The negative effect of higher net debt and lower EBITDA is more than offset by the higher valuation multiples of its peers.

Exhibit 4: Valuation peers for Hellenic Petroleum

Name

Year end

Market cap (€m)

EV
(€m)

EV/EBITDA
(x)

P/E
(x)

FCF yield
(%)

Dividend yield (%)

Europe

 

 

 

FY19

FY20

FY19

FY20

FY19

FY20

FY19

FY20

Polski Koncern Naftowy Orlen

Dec

10,184

11,465

5.2

5.3

8.8

9.1

N/A

N/A

3.3

3.7

Turkiye Petrol Rafinerileri

Dec

4,864

7,041

8.7

5.4

15.1

6.1

11.2

3.3

6.4

14.4

Motor Oil Hellas Corinth Refineries

Dec

2,409

2,659

4.9

4.6

8.7

7.3

N/A

N/A

6.4

6.4

Saras

Dec

1,517

1,533

4.1

2.6

14.5

5.3

1.9

6.9

4.2

8.1

Grupa Lotos

Dec

3,916

4,369

6.1

4.7

11.4

8.1

N/A

N/A

3.2

3.4

Hellenic Petroleum

Dec

2,659

4,262

6.6

5.3

10.6

7.3

16.5

20.1

5.7

5.7

European median

 

5.7

5.0

11.0

7.3

11.2

6.9

5.0

6.1

US

 

FY19

FY20

FY19

FY20

FY19

FY20

FY19

FY20

Marathon Petroleum

Dec

38,013

60,541

6.5

5.2

14.7

8.7

N/A

N/A

3.3

3.6

CVR Energy

Dec

4,232

4,667

6.0

6.9

12.1

16.7

N/A

N/A

6.6

6.9

HollyFrontier

Dec

7,674

8,770

5.4

5.5

10.3

9.9

-5.4

0.2

2.5

2.6

Par Pacific Holdings

Dec

1,157

1,439

6.9

5.9

21.3

12.7

N/A

N/A

0.0

0.0

PBF Energy

Dec

3,629

4,794

7.0

3.5

33.1

7.0

-0.2

13.9

3.6

3.6

Phillips 66

Dec

47,597

54,695

7.9

7.0

13.1

10.9

2.4

4.2

2.9

3.2

Valero Energy

Dec

37,390

42,732

8.8

6.0

19.6

10.2

1.7

8.0

3.6

3.9

US median

 

6.9

5.9

14.7

10.2

0.8

6.1

3.3

3.6

Source: Refinitiv, Edison Investment Research

Exhibit 5: Financial summary

Accounts: IFRS, year-end: December, €m

 

 

2016

2017

2018

2019e

2020e

2021e

INCOME STATEMENT

 

 

 

 

 

 

 

 

Total revenues

 

 

6,680

7,995

9,769

9,113

9,264

9,279

Cost of sales

 

 

(5,673)

(6,907)

(8,770)

(8,250)

(8,266)

(8,309)

Gross profit

 

 

1,007

1,087

999

863

998

970

SG&A (expenses)

 

 

(409)

(410)

(475)

(455)

(456)

(456)

Other income/(expense)

 

 

28

(16)

(10)

19

18

18

Exceptionals and adjustments

 

 

110

18

(19)

20

0

0

Reported EBIT

 

 

626

662

514

427

560

532

Finance income/(expense)

 

 

(201)

(165)

(146)

(113)

(84)

(74)

Profit (loss) from JVs/associates (post tax)

 

 

19

31

(2)

13

10

10

Other income (includes exceptionals)

 

 

21

(8)

2

1

0

0

Reported PBT

 

 

466

520

369

328

486

468

Income tax expense (includes exceptionals)

 

 

(137)

(136)

(154)

(70)

(121)

(117)

Reported net income

 

 

329

384

215

258

364

351

Basic average number of shares, m

 

 

306

306

306

306

306

306

Basic EPS (€)

 

 

1.1

1.3

0.7

0.8

1.2

1.1

Adjusted EBITDA

 

 

731

833

730

645

806

778

Adjusted EBIT

 

 

522

644

533

417

560

532

Adjusted PBT

 

 

361

502

388

318

486

468

Adjusted net income

 

 

252

371

291

251

364

 

Adjusted EPS (€)

 

 

0.82

1.21

0.95

0.82

1.19

1.15

DPS (€)

 

 

0.20

0.40

0.75

0.50

0.50

0.50

BALANCE SHEET

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

3,303

3,312

3,269

3,226

3,170

3,144

Intangible assets

 

 

108

106

106

335

335

335

Other non-current assets

 

 

883

864

529

501

508

516

Total non-current assets

 

 

4,295

4,282

3,903

4,062

4,014

3,996

Cash and equivalents

 

 

1,082

1,019

1,276

1,021

839

477

Inventories

 

 

929

1,056

993

1,010

1,024

1,084

Trade and other receivables

 

 

868

791

822

827

834

861

Other current assets

 

 

15

12

3

3

3

3

Total current assets

 

 

2,894

2,878

3,094

2,861

2,700

2,425

Non-current loans and borrowings

 

 

1,456

920

1,627

1,615

1,215

765

Other non-current liabilities

 

 

423

300

420

610

610

610

Total non-current liabilities

 

 

1,879

1,220

2,047

2,226

1,826

1,376

Trade and other payables

 

 

1,778

1,661

1,349

1,403

1,458

1,493

Current loans and borrowings

 

 

1,386

1,900

1,109

798

798

798

Other current liabilities

 

 

4

7

97

84

84

84

Total current liabilities

 

 

3,168

3,568

2,555

2,284

2,339

2,375

Equity attributable to company

 

 

2,040

2,309

2,331

2,349

2,484

2,606

Non-controlling interest

 

 

102

63

64

64

64

64

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

Profit before tax

 

 

466

520

369

321

486

468

Depreciation and amortisation

 

 

209

189

197

229

246

246

Other adjustments

 

 

236

207

237

130

74

64

Movements in working capital

 

 

(1,228)

(463)

(296)

(2)

34

(51)

Income taxes paid

 

 

(16)

(10)

(5)

(92)

(121)

(117)

Cash from operations (CFO)

 

 

(334)

443

503

587

718

610

Capex

 

 

(126)

(209)

(157)

(170)

(190)

(220)

Acquisitions & disposals net

 

 

(0)

0

(16)

(5)

0

0

Other investing activities

 

 

10

24

311

28

7

6

Cash used in investing activities (CFIA)

 

 

(116)

(185)

138

(148)

(183)

(214)

Net proceeds from issue of shares

 

 

0

0

(1)

0

0

0

Dividends paid in period

 

 

(3)

(107)

(151)

(229)

(229)

(229)

Movements in debt

 

 

(393)

(35)

(97)

(334)

(400)

(450)

Other financing activities

 

 

(192)

(149)

4

(112)

(89)

(78)

Cash from financing activities (CFF)

 

 

(589)

(300)

(244)

(674)

(718)

(757)

Increase/(decrease) in cash and equivalents

 

 

(1,039)

(42)

397

(221)

(183)

(361)

Currency translation differences and other

 

 

10

(9)

5

10

0

0

Cash and equivalents at end of period

 

 

924

873

1,275

1,020

837

476

Net (debt)/cash*

 

 

(1,761)

(1,802)

(1,460)

(1,391)

(1,174)

(1,086)

Free cash flow (pre dividends)

 

 

(450)

258

641

439

535

396

Source: Company data, Edison Investment Research. Note: *Excluding c €180m IFRS16 lease liabilities.


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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Hellenic Petroleum and prepared and issued by Edison, in consideration of a fee payable by Hellenic Petroleum. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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