• CLEAN AND ENVIRONMENTALLY FRIENDLY Natural gas is the cleanest and most environmentally friendly of all fossil fuels...Read more

  • WELL DRILLING PADThe size of a typical drilling pad is about 1 hectare. To compare, the floorage of an average shopping centre is 4.5 hectares... Read more

  • SECURING OF WELL DRILLING PADA drilling pad as well as the adjacent pool are reinforced and tightened with concrete slabs. Protective foil is additionally laid where necessary.

  • WORK NOISEWell drilling does not produce onerous noise. The intensity of sounds generated in connection with drilling work is lower than that generated by street traffic.Read more

  • SAFETY OF FRACTURING PROCESSIn Poland, exploration wells in shale rock are drilled to depths of over 2.5 km.Read more

  • COMPOSITION OF FRACTURING FLUIDFracturing fluid is 95% water. Read more

  • NO MAJOR LANDSCAPE INTERFERENCEIf gas production is launched, the land surrounding the isolated, secured zone, is subject to a reclamation treatment. Read more

Statement of Compliance with Corporate Governance Rules at Polskie Górnictwo Naftowe i Gazownictwo S.A. – Contents

2. Indication of the corporate governance standards referred to in Section 1 which were not applied by the Issuer, along with a statement of reasons for not applying a given standard

Three rules defined in the Code of Best Practice were not complied with in 2012:

  1. Best practice for supervisory board members – rule 6;
  2. Best practice for supervisory board members – rule 8;
  3. Best practice for shareholders – rule 10 (under the Code of Best Practice, the compliance requirement has applied to the Issuer since January 1st 2013).

Below, the Issuer provides grounds for not complying with these rules.

2.1. Best practice for supervisory board members – rule 6

“At least two members of the supervisory board should meet the criteria of being independent from the company and from entities having material links with the company. With respect to the independence criteria for supervisory board members, Annex II to the Commission Recommendation of February 15th 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board should apply. Irrespective of the provisions of point (b) of the said Annex, a person who is an employee of the company or its subsidiary or associate cannot be deemed to meet the independence criteria described in the Annex. Furthermore, an actual and material link with a shareholder having the right to exercise 5% or more of the total vote at the general meeting is deemed to preclude independence of a supervisory board member as defined in this rule.”

In the reporting period, there was only one independent member on the Issuer’s Supervisory Board – Mieczysław Puławski.

Pursuant to Par. 36.1 of the Issuer’s Articles of Association (“the Articles of Association”), one of the members of the Supervisory Board appointed by the General Meeting should meet all of the following requirements:

  1. He or she has been appointed in accordance with the special election procedure set forth in the Articles of Association;
  2. He or she may not be a related party or a subsidiary of the Issuer;
  3. He or she may not be a related party of the Issuer’s parent or of another subsidiary of such parent; and
  4. He or she may not have any connections with the Issuer or with any of the entities referred to in items 2 and 3 which could materially affect his or her ability to make impartial decisions as a member of the Supervisory Board.

Given the fact that – in accordance with Art. 12 of the Act on Commercialisation and Privatisation dated August 30th 1996 (consolidated text in Dz.U. of 2002, No. 171, item 1397, as amended) – some of the Company’s Supervisory Board members are elected by employees, the Issuer cannot increase the number of independent members on its Supervisory Board. Any increase in the number of independent Supervisory Board members above the number currently set forth in the Articles of Association would lead to a situation where the State Treasury (the Issuer’s majority shareholder) would be unable to appoint the majority of the Supervisory Board members. This in turn would violate the rule stipulating that a shareholder’s influence on a company’s business should be proportionate to the share capital held by such shareholder.

2.2. Best practice for supervisory board members – rule 8

“With respect to the tasks and the operation of the supervisory board committees, Annex I to Commission Recommendation of February 15th 2005 on the role of non-executive or supervisory directors (...)”

An Audit Committee operates within the Issuer’s Supervisory Board as a standing committee, advising the Supervisory Board on matters within the Committee’s remit.

For a detailed description of the Audit Committee’s rules of operation, see Section 11.3 hereof.

Pursuant to the Code of Best Practice, with respect to the tasks and the operation of its Supervisory Board committees, the Issuer should apply the rules laid down in Annex I to Commission Recommendation of February 15th 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board. In the case of the Audit Committee, the primary purpose of the said rules is to ensure that the Audit Committee correctly performs its role. The Issuer has complied with all the requirements which guarantee the Audit Committee’s involvement in the supervision of the Issuer’s business, however, the Issuer has not complied with all the detailed requirements concerning the operation of the Committee. The requirements which the Issuer has not complied with include:

  1. rule laid down in Section 4.3.2 of Annex I, pursuant to which the management should inform the audit committee of the methods used to account for significant and unusual transactions where the accounting treatment may be open to different approaches;
  2. rule laid down in Section 4.3.8 of Annex I, pursuant to which the audit committee should review the process whereby the company complies with existing provisions regarding the possibility for employees to report alleged significant irregularities in the company, by way of complaints or through anonymous submissions, normally to an independent director, and should ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.

Given the way the Audit Committee currently operates, the Issuer does not consider it necessary to introduce very detailed rules to regulate its operation. The Issuer will take appropriate steps in the future, if justified given the actual manner of operation of the Audit Committee.

2.3. Best practice for shareholders – rule 10
(under the Code of Best Practice, the compliance requirement has applied to the Issuer since January 1st 2013)

“A company should enable its shareholders to participate in a General Meeting using electronic communication means through:
1) Real-life broadcast of General Meetings,
2) Real-time bilateral communication where shareholders may take the floor during a General Meeting from a location other than the General Meeting.”

The Company has decided not to comply with the rule as the Company’s Articles of Association currently in force do not provide for shareholders’ participation in a General Meeting using electronic means of communication. In accordance with the Commercial Companies Code, bringing into effect the above corporate governance rule requires a relevant amendment to the Company’s Articles of Association. Upon amendment to its Articles of Association, the Company will be able to comply with the rule in the future.

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