Last close As at 05/08/2026
EUR13.09
▲ 0.05 (0.38%)
Market capitalisation
EUR4,001m
Research: Energy & Resources
Hellenic Petroleum experienced a weaker Q220 due to record-low benchmark margins. As a consequence of the unprecedented impacts of COVID-19, demand for global crude oil and oil products collapsed. As lockdown measures were imposed across Europe, lower economic activity severely affected travel and tourism markets in countries like Greece. Despite the current headwinds the industry is facing, Hellenic maintained a strong operating performance and was capable of minimising the impacts of COVID-19. This was possible due to its storage capacity and the flexibility of its refining system. We have updated our estimates and valuation to reflect Q220 results and the impact of COVID-19. Our updated valuation is down 3% to €6.81/share.
Written by
Hellenic Petroleum |
Overcoming unprecedented uncertainties |
Operating update |
Oil & gas |
22 September 2020 |
Share price performance
Business description
Next events
Analysts
Hellenic Petroleum is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Hellenic Petroleum experienced a weaker Q220 due to record-low benchmark margins. As a consequence of the unprecedented impacts of COVID-19, demand for global crude oil and oil products collapsed. As lockdown measures were imposed across Europe, lower economic activity severely affected travel and tourism markets in countries like Greece. Despite the current headwinds the industry is facing, Hellenic maintained a strong operating performance and was capable of minimising the impacts of COVID-19. This was possible due to its storage capacity and the flexibility of its refining system. We have updated our estimates and valuation to reflect Q220 results and the impact of COVID-19. Our updated valuation is down 3% to €6.81/share.
Year-end |
Revenue |
Adjusted |
Net debt |
P/E |
Dividend yield |
12/18 |
9,769 |
730 |
1,460 |
8.0 |
14.4** |
12/19 |
8,857 |
570 |
1,544 |
9.5 |
9.6 |
12/20e |
6,554 |
379 |
1,757 |
20.6 |
9.6 |
12/21e |
6,556 |
604 |
1,790 |
7.7 |
9.6 |
Note: *Adjusted numbers account for inventory movements and other one-off items. **Includes special dividend from DESFA proceeds.
Overcoming record-low refining margins
2020 is proving to be a challenging year for the oil and gas industry. Demand for global crude oil and oil products collapsed and refining margins reached historical low values. The outlook for Q320 remains weak as uncertainty persists and new spikes of COVID-19 cases are observed across the world. However, Hellenic has proved capable of navigating through tough periods in the past and, via efficient storage management and trading around the forward curve, has largely been able to offset the negative effects of COVID-19 on its performance.
Aspropyrgos turnaround underway
Full turnaround of the Aspropyrgos refinery is now underway, which is a key priority for Hellenic in 2020. This will be the biggest shutdown and maintenance project that Hellenic has undertaken in a single turnaround of refinery, with more than €130m of maintenance and capital expenditure invested. At the same time, it expects the Kozani 204MW photovoltaic project transaction to be closed in September, and is targeting commercial operations starting in Q122. The technical solution has been finalised and funding discussions are at an advanced stage.
Valuation: Blended valuation at €6.81/share
Our valuation is based on a blend of DCF, EV/EBITDA and P/E approaches. Hellenic is currently trading at a premium to European peers on 5.9x FY21e EV/EBITDA, versus the sector average of 4.2x, and 7.7x FY21e P/E compared to the European sector average of 5.9x. Our blended valuation falls 3% to €6.81/share (previously €7.00/share), reflecting the expected lower demand for oil products in the next three to six months and lower realised margins.
Good operational performance despite COVID-19
During 2019, the fundamentals of the Greek economy improved. However, the COVID-19 pandemic disrupted global financial stability and reversed the prospects for Greek economic growth, with GDP declining 1.6% in Q120 versus the last quarter of 2019 and 0.9% versus Q119, reflecting the beginning of the confinement measures imposed in March. With the country particularly affected by lockdowns, travel and tourism restrictions, the collapse in demand led to record-low benchmark refining margins. Total demand for motor fuels decreased by 14.5% in H120, and aviation and bunkers demand decreased by 58% in Q220 compared to the same quarter in 2019.
|
Exhibit 1: Domestic market fuel demand (MT 000s) |
Exhibit 2: Aviation and bunkers fuel demand (MT 000s) |
|
|
|
Source: Hellenic Petroleum, Edison Investment Research |
Source: Hellenic Petroleum, Edison Investment Research |
|
Exhibit 1: Domestic market fuel demand (MT 000s) |
|
|
Source: Hellenic Petroleum, Edison Investment Research |
|
Exhibit 2: Aviation and bunkers fuel demand (MT 000s) |
|
|
Source: Hellenic Petroleum, Edison Investment Research |
Despite these challenges, Hellenic was able to maintain operations uninterrupted and positive operating cash flow. It was able to manage the low demand with efficient storage management and by trading around the forward curve. This was possible due to Hellenic’s storage capacity and the flexibility of its refining system. Against this challenging backdrop, Q220 results were still positive with adjusted EBITDA standing at €63m, c 50% lower than the same period in 2019. Inventory gains of €26m were reported in the quarter, as crude oil prices recovered, offsetting part of the loss from the previous quarter. The company reported net debt of €1.8bn, slightly lower than in Q120.
|
Exhibit 3: Benchmark margins ($/bbl) – FCC |
Exhibit 4: Benchmark margins ($/bbl) – hydrocracking |
|
|
|
Source: Hellenic Petroleum, Edison Investment Research |
Source: Hellenic Petroleum, Edison investment Research |
|
Exhibit 3: Benchmark margins ($/bbl) – FCC |
|
|
Source: Hellenic Petroleum, Edison Investment Research |
|
Exhibit 4: Benchmark margins ($/bbl) – hydrocracking |
|
|
Source: Hellenic Petroleum, Edison investment Research |
The outlook for refiners remains weak in the coming quarters as uncertainty persists and new spikes in COVID-19 cases are observed across the world. A key priority for Hellenic will be full turnaround of the Aspropyrgos refinery. This will be the biggest shutdown and maintenance project that Hellenic has undertaken in a single turnaround of a refinery, with more than €130m of maintenance and capital expenditure invested so far in H220, including €60m of upgrades and environmental projects. Hellenic expects a lower output of 800kt in Q320 and Q420 as a consequence of the turnaround in a period when gross production typically amounts to c 4,000kt.
Hellenic has reiterated that renewables are a key pillar of its strategy for improving its carbon footprint. Management believes that renewables will allow the company to reduce earnings volatility, lower market risk and diversify from its core refining business. Some COVID-19 related delays are expected in the development of the Kozani 204MW photovoltaic project. However, management expects the transaction to be closed in September 2020, and is targeting commercial operations to start in Q122. The technical solution has been finalised and the company’s funding discussions are at an advanced stage.
Financials and changes to estimates
Key changes to our financial estimates and market expectations include weaker global demand for oil products during the year caused by the COVID-19 pandemic. As a consequence, we have lowered our refining margin estimates for Q320 to reflect low benchmark margins in May to August 2020: Aspropyrgos benchmark margins averaged -$0.3/bbl in the July to August period compared to $3.8/bbl in Q120 and $0.5/bbl in Q220; Thessaloniki averaged -$1.9/bbl in July to August versus $0.0/bbl in Q120 and Q220; and Elefsina averaged -$0.5/bbl in July-August vs $5.2bbl in Q120 and $0.2/bbl in Q220). We expect margins to remain under pressure for at least the next three to six months, with subsequent improvements as the global economy recovers from the coronavirus and oil prices potentially remain at relatively subdued levels. All in all, our FY20e total EBITDA is 22% lower vs our previous estimate to account for ongoing weakness in the benchmark margins and the record-low margins achieved in Q220. Our FY21e total EBITDA remains broadly unchanged.
Exhibit 5: Changes to Edison forecasts
€m |
Actual |
Edison new |
Edison old |
Difference (%) |
|||
|
FY19 |
FY20e |
FY21e |
FY20e |
FY21e |
FY20e |
FY21e |
Adjusted EBITDA, refining |
346 |
245 |
387 |
299 |
398 |
-18% |
-3% |
Adjusted EBITDA, petrochemicals |
93 |
66 |
90 |
69 |
80 |
-4% |
12% |
Adjusted EBITDA, marketing |
138 |
78 |
135 |
128 |
138 |
-39% |
-2% |
Other |
(14) |
(10) |
(8) |
(10) |
(8) |
0% |
0% |
Total adjusted EBITDA |
570 |
379 |
604 |
484 |
608 |
-22% |
-1% |
Associates |
18 |
19 |
10 |
46 |
10 |
||
Adjusted EBIT |
339 |
136 |
362 |
238 |
362 |
-43% |
0% |
Finance costs |
(151) |
(105) |
(98) |
(105) |
(97) |
||
Adjusted net income |
167 |
77 |
206 |
136 |
206 |
-43% |
0% |
Source: Hellenic Petroleum data, Edison Investment Research
Our updated FY20 EBITDA estimate is currently 13% below consensus, while our FY21 EBITDA estimate is broadly in line with consensus.
Exhibit 6: Edison forecasts versus consensus
€m |
Actual |
Edison |
Consensus |
Difference (%) |
|||
|
FY19 |
FY20 |
FY21 |
FY20 |
FY21 |
FY20 |
FY21 |
Adjusted EBITDA, refining |
346 |
245 |
387 |
||||
Adjusted EBITDA, petrochemicals |
93 |
66 |
90 |
||||
Adjusted EBITDA, marketing |
138 |
78 |
135 |
||||
Other |
(14) |
(10) |
(8) |
||||
Total adjusted EBITDA |
570 |
379 |
604 |
434 |
620 |
-13% |
-3% |
Associates |
18 |
19 |
10 |
|
|
||
Adjusted EBIT |
339 |
136 |
362 |
88 |
380 |
54% |
-5% |
Finance costs |
(151) |
(105) |
(98) |
|
|
||
Adjusted net income |
167 |
77 |
206 |
47 |
276 |
64% |
-25% |
Source: Hellenic Petroleum data, Edison Investment Research, Refinitiv estimates as at 17 September 2020
Valuation
We continue to value Hellenic using a blend of DCF, leveraged and unleveraged FY21e EV/EBITDA and FY21e P/E multiples, arriving at a valuation of €6.81/share, 3% lower than our last published estimate of €7.00/share, driven by slightly lower earnings estimates in FY21. Changes to our forecasts are shown in Exhibit 5 above.
Hellenic trades on FY21e multiples of 7.7x P/E and 5.9x EV/EBITDA compared to the European group averages of 5.9x and 4.2x, respectively. Its FCF yield is also slightly higher than the peer group average at 13.5% in FY21e and its EV per complexity adjusted barrel is higher than European peers at $1,330/bbld. At the same time, the company trades at a discount to US peers on the majority of valuation metrics. Our DCF valuation is based on discounted cash flows to 2025, using an unchanged 7% cost of capital. We incorporate a terminal value, which assumes the unwinding of working capital and a -1% terminal growth. This results in a DCF valuation of €7.73/share versus our previous estimate of €8.02/share. The reduction in DCF reflects lower refining margins in the first half of 2020 compared to 2019, together with our initial expectations, followed by the anticipated recovery in Q420.
|
Exhibit 7: Hellenic valuation |
|
|
Source: Edison Investment Research. Note: Price as at 17 September 2020. |
Since the beginning of the year, the market caps of Hellenic and its peers have decreased by an average of c 45%. Concerns about lower global demand for oil and petrochemicals have had an impact on global refining systems. Nonetheless, compared to its European peers, Hellenic benefits from a flexible refining system with large storage capacity and proximity to Middle East oil suppliers, taking advantage of crude spreads, especially on increasing freight rates.
|
Exhibit 8: Share price performance of Hellenic and its peers since January 2020 |
|
|
Source: Edison Investment Research, Refinitiv. Note: Prices as at 17 September 2020. |
Exhibit 9: Peer group valuation table
Market cap |
EV |
P/E FY20e |
P/E FY21e |
EV/ |
EV/ |
FCF yield |
FCF yield FY21e |
P/CF FY20e |
P/CF FY21e |
Net debt/ |
Net debt/ |
Div yield FY20e |
Refining capacity |
EV/bbld of complexity adjusted capacity ($/kbod) |
|
Edison estimate – Hellenic |
1,724* |
3,909* |
21.0 |
7.1 |
9.5 |
5.7 |
3.2% |
14.6% |
7.9 |
3.5 |
4.7 |
2.8 |
9.8% |
344 |
1,317 |
Europe |
2,335 |
3,858 |
6.8 |
5.9 |
6.9 |
4.1 |
-11.7% |
12.9% |
(0.7) |
3.5 |
2.0 |
1.0 |
2.3% |
385 |
1,010 |
Grupa Lotos |
1,890 |
2,408 |
6.2 |
4.6 |
4.1 |
3.3 |
14.7% |
16.0% |
3.2 |
3.5 |
1.3 |
1.0 |
1.0% |
211 |
1,142 |
Hellenic Petroleum (consensus) |
1,849 |
4,215 |
5.0 |
5.9 |
10.9 |
4.8 |
-7.1% |
18.9% |
4.0 |
2.8 |
5.0 |
2.2 |
5.1% |
344 |
1,317 |
Motor Oil Hellas Corinth Refineries |
1,490 |
2,480 |
7.2 |
6.0 |
5.6 |
4.7 |
-28.2% |
9.9% |
7.5 |
3.4 |
0.9 |
0.8 |
6.7% |
185 |
1,166 |
Polski Koncern Naftowy Orlen |
5,485 |
8,681 |
6.2 |
4.8 |
4.2 |
3.4 |
-5.2% |
3.8% |
3.2 |
2.5 |
0.3 |
0.3 |
0.8% |
707 |
1,335 |
Saras |
634 |
994 |
7.5 |
9.1 |
3.6 |
2.7 |
-37.4% |
21.3% |
5.5 |
1.8 |
(0.4) |
(0.3) |
0.0% |
300 |
283 |
Turkiye Petrol Rafinerileri |
2,662 |
4,373 |
8.5 |
5.2 |
13.0 |
5.9 |
-7.1% |
7.7% |
(27.8) |
7.2 |
5.1 |
2.3 |
0.1% |
564 |
816 |
US |
14,245 |
28,017 |
28.2 |
9.0 |
15.2 |
7.2 |
-4.5% |
4.5% |
19.7 |
5.0 |
4.1 |
2.1 |
7.3% |
1,789 |
1,318 |
CVR Energy |
1,469 |
2,786 |
46.7 |
11.7 |
21.7 |
6.8 |
-5.7% |
12.1% |
27.1 |
5.1 |
4.2 |
1.3 |
8.9% |
185 |
1,158 |
HollyFrontier |
3,540 |
5,650 |
18.2 |
6.5 |
9.5 |
5.8 |
-2.9% |
-7.8% |
9.1 |
5.3 |
2.6 |
1.6 |
6.4% |
457 |
989 |
Marathon Petroleum |
21,037 |
60,188 |
48.4 |
10.8 |
14.5 |
9.3 |
-5.4% |
7.7% |
37.8 |
3.7 |
6.6 |
4.2 |
7.1% |
3,021 |
1,880 |
Phillips 66 |
25,311 |
40,447 |
11.1 |
7.8 |
14.2 |
7.3 |
-4.2% |
4.9% |
11.4 |
5.9 |
3.6 |
1.8 |
6.1% |
2,184 |
1,684 |
Valero Energy |
19,870 |
31,015 |
16.3 |
8.4 |
16.1 |
6.7 |
-4.5% |
5.4% |
12.8 |
5.1 |
3.7 |
1.5 |
8.1% |
3,100 |
878 |
Average |
7,247 |
13,929 |
16.1 |
7.3 |
10.4 |
5.5 |
-7.2% |
9.6% |
8.3 |
4.1 |
3.1 |
1.6 |
5.0% |
967 |
1,164 |
Source: Edison Investment Research, Refinitiv estimates. Note: Prices as at 17 September 2020. *FX = US$1.10/€.
Exhibit 10: Financial summary
IFRS, year-end: 31 December |
€m |
|
2017 |
2018 |
2019 |
2020e |
2021e |
INCOME STATEMENT |
|
|
|
|
|
|
|
Total revenues |
|
|
7,995 |
9,769 |
8,857 |
6,554 |
6,556 |
Cost of sales |
|
|
(6,907) |
(8,770) |
(8,052) |
(6,503) |
(5,748) |
Gross profit |
|
|
1,087 |
999 |
805 |
51 |
808 |
SG&A (expenses) |
|
|
(410) |
(475) |
(470) |
(459) |
(460) |
Other income/(expense) |
|
|
(16) |
(10) |
6 |
15 |
14 |
Exceptionals and adjustments |
|
|
18 |
(19) |
2 |
(514) |
0 |
Reported EBIT |
|
|
662 |
514 |
341 |
(396) |
362 |
Finance income/(expense) |
|
|
(165) |
(146) |
(151) |
(105) |
(98) |
Profit (loss) from JVs/associates (post tax) |
|
|
31 |
(2) |
18 |
19 |
10 |
Other income (includes exceptionals) |
|
|
(8) |
2 |
(1) |
4 |
0 |
Reported PBT |
|
|
520 |
369 |
207 |
(477) |
275 |
Income tax expense (includes exceptionals) |
|
|
(136) |
(154) |
(43) |
161 |
(69) |
Reported net income |
|
|
384 |
215 |
164 |
(316) |
206 |
Basic average number of shares, m |
|
|
306 |
306 |
306 |
306 |
306 |
Basic EPS (€) |
|
|
1.3 |
0.7 |
0.5 |
(1.0) |
0.7 |
Adjusted EBITDA |
|
|
833 |
730 |
570 |
379 |
604 |
Adjusted EBIT |
|
|
644 |
533 |
339 |
136 |
362 |
Adjusted PBT |
|
|
502 |
388 |
205 |
54 |
275 |
Adjusted net income |
|
|
371 |
291 |
167 |
77 |
206 |
Adjusted EPS (€) |
|
|
1.21 |
0.95 |
0.55 |
0.25 |
0.67 |
DPS (€) |
|
|
0.40 |
0.75 |
0.50 |
0.50 |
0.50 |
BALANCE SHEET |
|
|
|||||
Property, plant and equipment |
|
|
3,312 |
3,269 |
3,298 |
3,220 |
3,198 |
Intangible assets |
|
|
106 |
106 |
104 |
105 |
105 |
Other non-current assets |
|
|
864 |
529 |
744 |
752 |
760 |
Total non-current assets |
|
|
4,282 |
3,903 |
4,146 |
4,077 |
4,063 |
Cash and equivalents |
|
|
1,019 |
1,276 |
1,088 |
924 |
441 |
Inventories |
|
|
1,056 |
993 |
1,013 |
755 |
889 |
Trade and other receivables |
|
|
791 |
822 |
840 |
709 |
771 |
Other current assets |
|
|
12 |
3 |
6 |
8 |
8 |
Total current assets |
|
|
2,878 |
3,094 |
2,947 |
2,396 |
2,109 |
Non-current loans and borrowings |
|
|
920 |
1,627 |
1,610 |
1,032 |
582 |
Other non-current liabilities |
|
|
300 |
420 |
617 |
458 |
458 |
Total non-current liabilities |
|
|
1,220 |
2,047 |
2,227 |
1,490 |
1,040 |
Trade and other payables |
|
|
1,661 |
1,349 |
1,402 |
1,377 |
1,472 |
Current loans and borrowings |
|
|
1,900 |
1,109 |
1,022 |
1,649 |
1,649 |
Other current liabilities |
|
|
7 |
97 |
115 |
113 |
113 |
Total current liabilities |
|
|
3,568 |
2,555 |
2,539 |
3,139 |
3,234 |
Equity attributable to company |
|
|
2,309 |
2,331 |
2,262 |
1,781 |
1,834 |
Non-controlling interest |
|
|
63 |
64 |
65 |
63 |
63 |
CASH FLOW STATEMENT |
|
|
|||||
Profit before tax |
|
|
520 |
369 |
207 |
(483) |
275 |
Depreciation and amortisation |
|
|
189 |
197 |
231 |
243 |
242 |
Other adjustments |
|
|
207 |
237 |
172 |
115 |
87 |
Movements in working capital |
|
|
(463) |
(296) |
26 |
337 |
(100) |
Income taxes paid |
|
|
(10) |
(5) |
(149) |
(11) |
(69) |
Cash from operations (CFO) |
|
|
443 |
503 |
486 |
202 |
435 |
Capex |
|
|
(209) |
(157) |
(241) |
(149) |
(220) |
Acquisitions & disposals net |
|
|
0 |
(16) |
(5) |
0 |
0 |
Other investing activities |
|
|
24 |
311 |
29 |
12 |
9 |
Cash used in investing activities (CFIA) |
|
|
(185) |
138 |
(218) |
(136) |
(211) |
Net proceeds from issue of shares |
|
|
0 |
(1) |
0 |
0 |
0 |
Dividends paid in period |
|
|
(107) |
(151) |
(155) |
(153) |
(153) |
Movements in debt |
|
|
(35) |
(97) |
(111) |
46 |
(450) |
Other financing activities |
|
|
(149) |
4 |
(160) |
(126) |
(104) |
Cash from financing activities (CFF) |
|
|
(300) |
(244) |
(458) |
(233) |
(707) |
Increase/(decrease) in cash and equivalents |
|
|
(42) |
397 |
(189) |
(167) |
(483) |
Currency translation differences and other |
|
|
(9) |
5 |
2 |
4 |
0 |
Cash and equivalents at end of period |
|
|
873 |
1,275 |
1,088 |
924 |
441 |
Net (debt)/cash |
|
|
(1,802) |
(1,460) |
(1,544) |
(1,757) |
(1,790) |
Source: Hellenic Petroleum, Edison Investment Research
|
|
Research: Financials
In June MyBucks (MBC) announced it had successfully completed its restructuring, conducting further business disposals to reduce its debt burden. This was accompanied by several management board changes, including the departure of Timothy Nuy (CEO) who was hired last year to lead the restructuring process. Meanwhile, MBC had postponed the publication of its interim results (now scheduled for September) while its major shareholder (Ecsponent) is facing financial challenges that are partially related to MBC’s underperformance. The latter could potentially limit further equity injections if MBC requires additional funding.