The PGNiG Group

Structure of the Group

As at the end of 2011, the PGNiG Group comprised PGNiG (the parent) and 36 production and service companies, including:

27 subsidiaries;
9 indirect subsidiaries.

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Changes in the PGNiG Group’s Structure

In February 2011, POGC Trading GmbH was registered in Germany. In August 2011, the company’s name was changed to PGNiG Sales & Trading GmbH.
In April 2011, PGNiG acquired Goldcup 5839 AB. Following the acquisition, the company’s name was changed to PGNiG Finance AB. The company’s purpose is to service PGNiG’s Eurobond issues.
In June 2011, PT Geofizyka Torun Indonesia LLC of Jakarta, Indonesia, was registered. Geofizyka Toruń Sp. z o.o. acquired a 55% interest in the company’s share capital.
In June 2011, PGNiG acquired PGNiG SPV 1 Sp. z o.o., whose purpose is to execute power projects.
In June 2011, Poszukiwania Nafty i Gazu Kraków Sp. z o.o. established Poltava Services LLC, a subsidiary in Ukraine, in which it holds a 99% equity interest.
In June 2011, PGNiG Technologie Sp. z o.o. acquired 5,000 shares in bn Naftomontaż Sp. z o.o. from minority shareholders, increasing its ownership interest in bn Naftomontaż Sp. z o.o. to 100%.
In October 2011, Geofizyka Torun Kish Ltd was deleted from a commercial register in Iran.
In December 2011, the process of consolidation of construction and assembly companies in the Other Activities segment was completed. PGNiG Technologie Sp. z o.o. (as the surviving company) merged with ZRUG Sp. z o.o. in Pogórska Wola, Zakład Urządzeń Naftowych Naftomet Sp. z o.o., Budownictwo Naftowe Naftomontaż Sp. z o.o. and BUG Gazobudowa Sp. z o.o.

Material Changes in the Group’s Structure in January 2012

In January 2012, PGNiG SPV 1 Sp. z o.o. executed a final share purchase agreement with Vattenfall AB, whereby PGNiG SPV 1 Sp. z o.o. acquired 24,591,544 shares in Vattenfall Heat Poland SA; the interest accounts for 99.8% of the company’s share capital and confers the right to 99.8% of the total vote at the General Meeting of Vattenfall Heat Poland SA. Vattenfall Heat Poland SA’s name was changed to PGNiG Termika SA.

Exploration and Production

Geofizyka Kraków

Geofizyka Kraków Sp. z o.o. provides geophysical services related to seismic data acquisition (2D/3D vibroseis and dynamite data acquisition), seismic data processing and interpretation, well logging, special well interventions, interpretations, perforations and downhole seismic surveys.

In 2011, Geofizyka Kraków generated revenue of PLN 247.3 m, of which 53% was derived from services rendered to customers outside the PGNiG Group. Eighty-seven percent of the company’s revenue represents sales to domestic customers. The key external customers for the field seismics include RWE Dea AG SA, Oculis Energy and Orlen Upstream Sp. z o.o. in Poland, and OMV Exploration & Production GmbH in Austria. The company also performed well logging in Slovakia.

In 2012, on the domestic market, the company will provide 2D and 3D seismic services to the PGNiG Group and Aurelian Oil & Gas PLC. On foreign markets, the company will continue to perform the contract with OMV Exploration & Production GmbH in Austria. Once the political situation in Libya and Pakistan stabilises, the company also intends to provide its services in those countries.

	Entity	2011	2010
Revenue	PLN m	247.3	224.3
Net profit (loss)	PLN m	8.9	1.9
Equity	PLN m	102.5	97.7
Total assets	PLN m	236.5	221.1
Headcount as at December 31	persons	1,604	1,517

Geofizyka Toruń

Geofizyka Toruń Sp. z o.o. provides geophysical services in the area of seismic surveys, from planning and data acquisition, to digital processing, to comprehensive geophysical and geological interpretations. The company also provides well logging and well intervention services, including interpretation of results. In addition, the company’s offering includes a variety of near-surface geophysical services in the field of geology, hydrogeology and environmental protection, as well as design and delivery of deep anode groundbeds for cathodic protection.

In 2011, Geofizyka Toruń generated revenue of PLN 371.1 m. Rendering of services to customers outside the PGNiG Group accounted for 70% of total revenue, of which 70% was generated on the Polish market. In 2011, the company continued its work for Chevron Polska Energy Resources Sp. z o.o., ExxonMobile Usługi Sp. z o.o. and FX Energy Poland Sp. z o.o., mainly in the area of data acquisition, as well as processing and interpretation of 2D and 3D seismic data. On foreign markets, the company provided services almost exclusively to third-party customers. The services primarily included acquisition of 2D and 3D seismic data and were provided in Germany, India and Egypt.

In 2012, Geofizyka Toruń’s operations on the domestic market will include acquisition, processing and interpretation of 2D and 3D seismic data, and well logging, mainly for the PGNiG Group as well as FX Energy Poland Sp. z o.o., bnK Petroleum and DPV Service Sp. z o.o. On foreign markets, the company will continue seismic data acquisition operations in Egypt, Germany and India, but also in Hungary, which is a new market for Geofizyka. The company intends to acquire new customers for its geological and well-logging services.

	Entity	2011	2010
Revenue	PLN m	371.1	302.0
Net profit (loss)	PLN m	21.3	22.0
Equity	PLN m	187.9	177.3
Total assets	PLN m	253.5	235.0
Headcount as at December 31	persons	1,881	1,630

PNiG Jasło

At the beginning of 2012, Poszukiwania Nafty i Gazu Jasło Sp. z o.o. was transformed into a joint-stock company.

The business of PNiG Jasło comprises drilling of core, exploration and production wells, well workovers, well abandonment services, provision of specialist well services (such as cementing, mud services or well completions), and operation of drilling rig instrumentation and control systems.

In 2011, PNiG Jasło provided services mainly on the Polish market. The company’s revenue was PLN 301.6 m, of which revenue from services rendered for the PGNiG Group accounted for 72%. The company’s services for third-party customers included drilling of crude oil wells and a geothermal well, cementing services and Datawell services. On the foreign markets, the company completed well drilling performed as part of the extension of an underground gas storage facility in the Czech Republic (jointly with PNiG Kraków) and workover services in Russia. The company also provided specialist service in several other European countries.

In 2012, the company will continue to perform services for the PGNiG Group and for external customers, including Termo-Glob Sp. z o.o. and Vabush Energy Sp. z o.o. Abroad, the political situation in Libya having stabilised, the company intends to continue its operations in the country. It will also provide services to customers outside the PGNiG Group on foreign markets. This will include continued Datawell service operation in Ukraine, workover and drilling services in Lithuania, and cementing services in Russia.

	Entity	2011	2010
Revenue	PLN m	301.6	241.6
Net profit (loss)	PLN m	2.0	8.1
Equity	PLN m	141.2	142.7
Total assets	PLN m	279.9	245.8
Headcount as at December 31	persons	917	925

The PNiG Kraków Group

The PNiG Kraków Group comprises Poszukiwania Nafty i Gazu Kraków Sp. z o. o., as well as its subsidiaries – Oil Tech International–F.Z.E. and Poltava Services LLC. The core business of PNiG Kraków includes geological, exploration and production drilling, well workovers, as well as services related to drilling, testing and well operation. The company also provides hospitality, catering, rental and training services. Oil Tech International–F.Z.E. leases drilling teams, materials, machinery and equipment. Poltava Services LLC’s services include drilling and lease of drilling teams.

In 2011, the PNiG Kraków Group generated revenue of PLN 421.1 m. Services provided to customers outside the PGNiG Group were the main source of revenue, accounting for 69% of the total (of which 96% was export revenue). On foreign markets the PNiG Kraków Group continued drilling work in Kazakhstan, Uganda, Pakistan, Ukraine and the Czech Republic. In 2011, the company completed a contract in Mozambique, where four wells were drilled. The group also leaseed drilling teams and equipment to third-party customers in the United Arab Emirates. In Poland, the company’s was involved mainly in drilling exploratory, appraisal and production wells for PGNiG.

East Africa is a strategic market for the PNiG Kraków Group. In 2012, the group will continue to work on its contract in Uganda, and to provide drilling services in Kazakhstan, Pakistan, Ukraine and the Czech Republic. The group also intends to expand its drilling operations on the Polish market. To this end, the company purchased an advanced drilling rig Drillmec 2000 HP with the walking system, capable of drilling multiple deep wells from a single spot.

	Entity	2011	2010
Revenue	PLN m	421.1	362.0
Net profit (loss)	PLN m	17.0	16.8
Equity	PLN m	174.6	174.3
Total assets	PLN m	497.7	392.5
Headcount as at December 31	persons	1,226	1,182

PNiG NAFTA

The core business of Poszukiwania Nafty i Gazu NAFTA Sp. z o.o. comprises exploration for oil and gas, including in particular designing and drilling research, appraisal, exploration and production boreholes, and preparing borehole documentation. The company also drills wells for underground storage of hydrocarbons, decommissions wells in used-up reserves, reconstructs developed wells, and provides support services through its workshop (specialising in repair of drilling equipment) and storage facilities.

In 2011, the company rendered its services mainly on the Polish market, for both the PGNiG Group and external customers. In 2011, its revenue was PLN 301.7 m, of which 53% was derived from services provided to the PGNiG Group. On the domestic market, drilling services mainly included exploratory and workover drilling for PGNiG, drilling for FX Energy Poland Sp. z o.o., and well drilling for companies exploring for unconventional gas: Energia Zachód Sp. z o.o., Saponis Investments Sp. z o.o., Talisman Energy Polska Sp. z o.o. and Chevron Polska Energy Resources Sp. z o.o. Outside Poland, PNiG Nafta Sp. z o.o. was involved in drilling campaigns in Egypt and Denmark.

On the domestic market in 2012, PNiG NAFTA Sp. z o.o. intends to continue to provide drilling services to PGNiG and to operators outside the PGNiG Group holding licences for hydrocarbon exploration in Poland: FX Energy Sp. z o.o., Talisman Energy Polska Sp. z o.o. and Chevron Polska Energy Resources Sp. z o.o. Abroad, the company plans to continue drilling in Egypt.

	Entity	2011	2010
Revenue	PLN m	301.7	296.4
Net profit (loss)	PLN m	15.6	14.0
Equity	PLN m	201.1	192.5
Total assets	PLN m	358.9	321.1
Headcount as at December 31	persons	860	799

PN Diament

The core business of Poszukiwania Naftowe Diament Sp. z o.o. are specialist well services, including drillings, major remedial treatments, well abandonment services, well testing, downhole measurements, application of enhanced recovery techniques and other services with the use of coiled tubing and nitrogen equipment, and well completion, drillstem testing and mud services. The company’s business also includes general and road construction.

In 2011, revenue of PN Diament was PLN 206.4 m, and sales to the PGNiG Group accounted for 53% of the total. The services provided to external customers included mainly drilling of research boreholes (in particular, 12 boreholes for KGHM Polska Miedź SA drilled within a copper licence area) and a range of maintenance services. The company also provided general construction services, including construction of earth and road structures, as well as construction and reclamation of waste landfills. These services were mainly provided to customers outside the PGNiG Group.

In 2012, PN Diament plans to provide a range of services to the PGNiG Group, including well drillings, workovers, abandonments and maintenance, as well as further construction work on the Barnówko oil terminal and storage depot. The services planned to be provided to external customers include drilling of 11 boreholes for KGHM Polska Miedź SA and site preparation for well surface installations for DrillTec GUT GmbH Grossbohr und Umwelttechnik.

	Entity	2011	2010
Revenue	PLN m	206.4	154.4
Net profit (loss)	PLN m	9.9	7.3
Equity	PLN m	103.3	99.8
Total assets	PLN m	151.8	135.3
Headcount as at December 31	persons	707	674

ZRG Krosno

Zakład Robót Górniczych Krosno Sp. z o.o. is a provider of well-servicing services. Its business includes mainly well interventions, such as workovers of active oil and gas wells, shallow drillings, coring, well abandonment services, decommissioning of infrastructure and waste pits, and other reclamation work. The company also provides a wide range of production intensification, measurement and laboratory services.

In 2011, ZRG Krosno generated revenue of PLN 71.5 m, 74% of which represented sales to the PGNiG Group. The company’s customers mainly included Polish branches of PGNiG, to which ZRG Krosno provided well intervention services consisting in workovers, well reconditioning, application of enhanced recovery techniques and measurements of reservoir parameters. Services to external customers were provided predominantly in Poland. They included drilling of a 1,400-metres-deep coal well for NWR Karbonia Sp. z o.o. The company also provided services consisting in application of enhanced recovery techniques and measurements of reservoir parameters for RWE DEA AG. SA and Park Wodny Bania Sp. z o.o. in Poland, for RWE Gas Storage s.r.o. in the Czech Republic, and for NAFTA a.s. in Slovakia.

In 2012, in Poland ZRG Krosno Sp. z o.o. will continue to provide workover services, and services involving the application of enhanced recovery techniques or measurement of reservoir parameters. The company will continue to drill coal wells for NWR Karbonia Sp. z o.o. in Poland and provide services consisting in the application of coiled tubing enhanced recovery techniques on further wells in the Czech Republic. The company’s operations in the Czech Republic will also include execution of a contract for abandonment of 27 wells.

	Entity	2011	2010
Revenue	PLN m	71.5	91.4
Net profit (loss)	PLN m	1.4	0.1
Equity	PLN m	42.6	41.1
Total assets	PLN m	58.7	58.7
Headcount as at December 31	persons	395	431

PGNiG Norway

PGNiG Norway AS has been established for the purposes of the Norwegian Continental Shelf project, the aim of which is to provide access to new recoverable reserves of oil and gas outside Poland. The principal business objective of PGNiG Norway is to explore for and produce crude oil and natural gas on the Norwegian Continental Shelf. The company has been pre-qualified by the Norwegian authorities as an operator.

On the Norwegian Continental Shelf, PGNiG Norway and its partners are implementing the Skarv/Snadd/Idun development project. PGNiG Norway holds a 12% interest in the licence; other interest holders are British Petroleum Norge AS (operator, 24%), Statoil Petroleum AS (36%) and E.ON Ruhrgas Norge AS (28%).

The Skarv project is one of the largest projects currently underway in Norway.

Production from the Skarv field will be carried out using a floating production, storage and offloading (FPSO) vessel with a flare tower. The platform, built in South Korea, is the largest FPSO vessel in the world, able to operate in rough weather conditions. After the finishing work and installation tests had been performed in the shipyard, the vessel was anchored in open sea, directly above the Skarv field, upon which all subsea structures (foundation slabs, gas pipelines etc.) were installed on the Skarv and Idun fields. Rough weather conditions delayed the installation of production pipes. Accordingly, the production launch has been postponed until the fourth quarter 2012.

The produced oil will be sold directly from the platform and transported by a business partner operating a fleet of shuttle tankers. The produced gas will be transmitted over the Gassled Area B System gas pipeline to the onshore terminal in Kårsto, to be redirected to Germany over the Gassled Area D System gas pipeline.

In October 2011, PGNiG Norway and Shell International Trading and Shipping Company Ltd. (“Shell”) concluded a crude oil sale agreement, whereby PGNiG Norway will sell to Shell PGNiG Norway’s share in crude oil produced from the Skarv field. The agreement was executed for an indefinite term and will become effective in the month when production from the field is launched. The minimum term of the agreement is 12 months.

In 2011, an appraisal well was drilled in the Snadd North field, discovered in 2010. As the exploratory well on licence PL419 proved dry and due to the low permeability of gas reservoir on licence PL326 (Gro field), work on the licences was discontinued.

In 2012, the company will also continue appraisal work on the Snadd North field. Further, the company plans to acquire new licence areas through participation in annual licence rounds or by acquiring interests from other entities.

	Entity	2011	2010
Revenue	PLN m	0,0	0,0
Net profit (loss)	PLN m	−131.6	−76.8
Equity	PLN m	291.0	314.2
Total assets	PLN m	4,661.4	3,424.1
Headcount as at December 31	persons	23	22

POGC Libya

The core business of Polish Oil and Gas Company-Libya B.V. consists in the exploration for and production of hydrocarbons in Libya. The company conducts exploration work in licence area No. 113 located within the Murzuq petroleum basin, under an Exploration and Production Sharing Agreement of February 25^th 2008 concluded with the Libyan government.

In 2011, the National Oil Corporation gave its consents (including one conditional consent) to the company’s drilling of two exploratory wells within the licence area. The company has also submitted two further drilling projects for approval by the National Oil Corporation. By February 2011, the company acquired 3,000 km of 2D profiles and 1,087 km² of 3D profiles, and carried out a number of geological analyses. Preparations for the drilling are underway.

When the civil war in Libya broke out in February 2011, all non-Libyan personnel of POGC Libya were evacuated from the country. In March 2011, the company gave notice to the National Oil Corporation of a force majeure event, which suspended performance of the Exploration and Production Sharing Agreement until the situation, which provided the basis for such notice, ceases to apply. In October 2011, the civil war in Libya ended and the company resumed the operation of the office for local employees.

In 2011 in Poland, in cooperation with PGNiG, the company completed the geological interpretation of 2D seismic data and planned data acquisition for the remaining second phase of the 3D survey.

In 2012, POGC Libya plans to bring expatriates back to Libya, and when the situation is stable enough to ensure the employees’ personal safety, the company will resume its work under the EPSA agreement. Having resumed the performance of the agreement, the company will commence drilling of exploratory wells in the second half of 2012 and the acquisition of second-phase 3D data. If the wells prove positive, POGC Libya intends to commence drilling of appraisal wells. As the Libyan market is expected to open to foreign investors, the company will apply for new exploratory and production licences.

	Entity	2011	2010
Revenue	PLN m	0.0	0.0
Net profit (loss)	PLN m	−20.7	−55.3
Equity	PLN m	47.6	54.8
Total assets	PLN m	52.9	64.8
Headcount as at December 31	persons	36	37