Consolidated Report of the LOTOS Group 3Q 2018

Consolidated half year report of LOTOS Group 2017

Consolidated report of the LOTOS Group

3Q 2018 This is the translated version of the document originally issued in Polish WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Consolidated report of LOTOS Group 3Q 2018

 The LOTOS Group - financial highlights 3Q 2018

 The LOTOS Group Financial report 3Q 2018

 Management’s Discussion and Analysis of 3Q 2018 consolidated financial results

 Supplementary information to the consolidated financial results of the LOTOS Group for 3Q 2018 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS - CONSOLIDATED PLNm EURm 9 months 9 months 9 months 9 months

ended ended ended ended Sep 30 2018 Sep 30 2017 Sep 30 2018 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited) Revenue 22,199.7 17,164.7 5,219.2 4,032.5 Operating profit 2,212.5 1,505.9 520,2 353.8 Pre-tax profit 2,105.1 1,712.7 494.9 402.4 Net profit 1,487.3 1,187.1 349.7 278.9 Net profit attributable to owners of the Parent 1,487.3 1,187.1 349.7 278.9 Net profit/(loss) attributable - - - - to non-controlling interests Total comprehensive income/(loss) 1,436.3 1,640,1 337.7 385.3 Total comprehensive income/(loss) attributable 1,436.3 1,640,1 337.7 385.3 to owners of the Parent Total comprehensive income/(loss) attributable - - - - to non-controlling interests Net cash from operating activities 1,695.7 2,112,8 398.7 496.3 Net cash from investing activities (581.0) (1,104,5) (136.6) (259.5) Net cash from financing activities (924.2) (204,5) (217.3) (48.0) Total net cash flow 190.5 803,8 44.8 188.8 Basic earnings per share (PLN/EUR) 8.04 6.42 1.89 1.51 Diluted earnings per share (PLN/EUR) 8.04 6.42 1.89 1.51

PLNm EURm As at As at As at As at Sep 30 2018 Dec 31 2017 Sep 30 2018 Dec 31 2017 (unaudited) (audited) (unaudited) (audited) Total assets 22,777.8 21,171.2 5,332.6 5,075.9 Equity attributable to owners of the Parent 11,955.1 10,712.4 2,798.9 2,568.4 Non-controlling interests 0.1 0.1 0.0 0.0 Total equity 11,955.2 10,712.5 2,798.9 2,568.4

FINANCIAL HIGHLIGHTS - SEPARATE PLNm EURm 9 months 9 months 9 months 9 months

ended ended ended ended Sep 30 2018 Sep 30 2017 Sep 30 2018 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited) Revenue 19,775.7 14,822.9 4,649.3 3,482.3 Operating profit 1,336.7 687.5 314.3 161.5 Pre-tax profit 1,667.5 992.4 392.0 233.1 Net profit 1,420.1 828.1 333.9 194.5 Total comprehensive profit/(loss) 1,360.2 1,268.7 319.8 298.1 Net cash from operating activities 353.9 928.4 83.2 218.1 Net cash from investing activities 398.3 (129.4) 93.6 (30.4) Net cash from financing activities (598.9) (676.9) (140.8) (159.0) Total net cash flow 153.3 122.1 36.0 28.7 Basic earnings per share (PLN/EUR) 7.68 4.48 1.81 1.05 Diluted earnings per share (PLN/EUR) 7.68 4.48 1.81 1.05

PLNm EURm As at As at As at As at Sep 30 2018 Dec 31 2017 Sep 30 2018 Dec 31 2017 (unaudited) (audited) (unaudited) (audited) Total assets 17,187.4 15,779.3 4,023.8 3,783.2 Equity 10,067.6 8,892.3 2,357.0 2,132.0

Items in the Financial Highlights table have been translated at the following EUR exchange rates:

Items of the statement of financial position have been translated at the mid-exchange rates quoted by the National Bank of Poland for the last day of the reporting period:

As at Sep 30 2018 As at Dec 31 2017

1 EUR = 4.2714 PLN 1 EUR = 4.1709 PLN

Items of the statement of comprehensive income and the statement of cash flows have been translated using the arithmetic mean of the mid- exchange rates quoted by the National Bank of Poland for the last day of each month in the reporting period:

9 months ended 9 months ended Sep 30 2018 Sep 30 2017 1 EUR = 4.2535 PLN 1 EUR = 4.2566 PLN

(This is a translation of a document originally issued in Polish) WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS Group

FINANCIAL REPORT FOR THE THIRD QUARTER OF 2018

(This is a translation of a document originally issued in Polish)

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I. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30TH 2018, PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ENDORSED BY THE EUROPEAN UNION ...... 3

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...... 4 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...... 5 CONSOLIDATED STATEMENT OF CASH FLOWS ...... 6 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...... 7

NOTES TO THE FINANCIAL STATEMENTS ...... 8

1. General information ...... 8 2. Composition of the Group ...... 8 3. Changes in the entity’s structure in the interim period, including changes which follow from mergers, acquisitions or sale of subsidiaries, long-term investments, restructuring or discontinuation of business ...... 10 4. Basis of preparation and presentation ...... 10 4.1 Accounting policies ...... 10 4.2 New standards and interpretations which have been published but are not yet effective ...... 12 4.3 Exchange rates ...... 12 5. Seasonality and cyclicality of business in the reporting period ...... 13 6. Material changes to reporting items, including amounts which significantly affect assets, liabilities, equity, net profit/(loss) or cash flows and which are non-typical due to their nature, value, effect or frequency ...... 13 7. Changes to estimates reported in previous interim periods of the current financial year or in previous financial years, where they have a material effect on the current interim period ...... 13 8. Business segments ...... 13 9. Expenses by nature ...... 15 10. Other income ...... 15 11. Other expenses ...... 15 12. Finance income ...... 16 13. Finance costs ...... 16 14. Income tax...... 17 14.1 Tax expense ...... 17 14.2 Deferred income tax ...... 17 14.2.1 Deferred tax assets and liabilities ...... 17 15. Earnings per share ...... 19 16. Dividends ...... 19 17. Impairment losses ...... 20 18. Acquisition and sale of property, plant and equipment and intangible assets ...... 21 19. Cash and cash equivalents ...... 21 20. Borrowings, other debt instruments and finance lease liabilities ...... 21 21. Provisions...... 23 22. Changes in the fair value determination method applied to financial instruments measured at fair value and in the classification of financial assets ...... 24 23. Contingent liabilities and assets ...... 24 23.1 Material court, arbitration or administrative proceedings, other risks to the Parent or its subsidiaries, and material settlements under court proceedings ...... 24 23.2 Other contingent liabilities ...... 24 24. Related parties ...... 24 24.1 Transactions with related entities in which the Group holds equity interests ...... 24 24.2 Entity having control of the Group ...... 24 24.2.1 Transactions with related entities of which the State Treasury has control or joint control or on which the State Treasury has significant influence ...... 24 24.3 Remuneration of members of the Company’s governing bodies and its key management staff ...... 25 24.4 Transactions with parties related to the Company through members of the Management Board and the Supervisory Board ... 25

II. QUARTERLY FINANCIAL INFORMATION OF THE PARENT FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30TH 2018 ...... 26

SEPARATE STATEMENT OF COMPREHENSIVE INCOME ...... 27 SEPARATE STATEMENT OF FINANCIAL POSITION ...... 28 SEPARATE STATEMENT OF CASH FLOWS ...... 29 SEPARATE STATEMENT OF CHANGES IN EQUITY ...... 30

AUTHORISATION OF QUARTERLY FINANCIAL REPORT FOR ISSUE ...... 31

(This is a translation of a document originally issued in Polish) WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

(This is a translation of a document originally issued in Polish) 3 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 (PLNm)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

3 months ended 9 months ended 3 months ended 9 months ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 Note (unaudited) (unaudited) (unaudited) (unaudited)

Revenue 8 8,344.0 22,199.7 6,262.5 17 164.7 Cost of sales 9 (7,010.8) (18,682.2) (5,064.1) (14,430.6)

Gross profit 1,333.2 3,517.5 1,198.4 2,734.1

Distribution costs 9 (348.6) (995.7) (330.5) (913.9) Administrative expenses 9 (105.5) (304.5) (113.1) (328.1) Other income 10 9.7 26.8 6.4 36.2 Other expenses 11 (22.0) (31.6) (4.7) (22.4)

Operating profit 866.8 2,212.5 756.5 1,505.9

Finance income 12 36.5 50.8 114.8 373.3 Finance costs 13 (53.7) (161.3) (53.9) (169.3) Share in net profit/(loss) of equity-accounted 2.4 3.1 1.6 2.8 joint ventures

Profit before tax 852.0 2,105.1 819,0 1,712.7 Corporate income tax 14.1 (220.4) (617.8) (200.2) (525.6) Net profit 631.6 1,487.3 618.8 1,187.1

Other comprehensive income/(loss)

Items that may be reclassified to profit or 51.0 (51.1) 42.7 453.0 loss: Exchange differences on translating foreign (5.9) 8.8 (9.7) 12.4 operations Cash flow hedges 70.3 (73.9) 64.7 543.9 Corporate income tax relating to cash flow 14.1 (13.4) 14.0 (12.3) (103.3) hedges

Items that will not be reclassified to profit - 0.1 - - or loss: Actuarial gain/(loss) relating to post- - 0.3 - - employment benefits Corporate income tax relating to actuarial 14.1 - (0.2) - - gain/(loss) under post-employment benefits

Other comprehensive income/(loss), net 51.0 (51.0) 42.7 453.0

Total comprehensive income/(loss) 682.6 1,436.3 661.5 1,640.1

Net profit attributable to: Owners of the Parent 15 631.6 1,487.3 618.8 1,187.1

Total comprehensive income/(loss) attributable to: Owners of the Parent 682.6 1,436.3 661.5 1,640.1

Net profit attributable to owners of the Parent per share (PLN) Weighted average number of shares (million) 15 184.9 184.9 184.9 184.9 - basic 15 3.42 8.04 3.35 6.42 - diluted 15 3.42 8.04 3.35 6.42

The Notes to the interim condensed consolidated financial statements, presented on pages 8 to 25, are an integral part of the statements

(This is a translation of a document originally issued in Polish)

4 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 (PLNm)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Sep 30 2018 Dec 31 2017 Note (unaudited) (audited)

ASSETS Non-current assets Property, plant and equipment of the Downstream segment 8,745.8 8,761.5 Intangible assets of the Downstream segment 159.6 163,2 Property, plant and equipment of the Upstream segment 2,618.6 2,404.2 Intangible assets of the Upstream segment 329.0 304.8 Equity-accounted joint ventures 107.6 106.5 Deferred tax assets 14.2 440.7 415.4 Derivative financial instruments 28.1 2.7 Other non-current assets 343.5 303.8 Total non-current assets 12,772.9 12,462.1

Current assets Inventories 4,555.3 3,559,6 - including emergency stocks 2,995.2 2,098.7 Trade receivables 2,975.2 2,677.0 Current tax assets 1.5 1.3 Derivative financial instruments 28.7 161.8 Other current assets 325.7 388.7 Cash and cash equivalents 19 2,118.5 1,920.7 Total current assets 10,004.9 8,709.1 Total assets 22,777.8 21,171.2

EQUITY AND LIABILITIES Equity Share capital 184.9 184.9 Share premium 2,228.3 2,228.3 Cash flow hedging reserve (285.1) (225.2) Retained earnings 9,726.0 8,432.2 Translation reserve 101.0 92.2 Equity attributable to owners of the Parent 11,955.1 10,712.4 Non-controlling interests 0.1 0,1 Total equity 11,955.2 10,712.5

Non-current liabilities Borrowings, other debt instruments and finance lease liabilities 20 2,840.1 2,738.3 Derivative financial instruments 2.8 6.7 Deferred tax liabilities 14.2 316.5 277.7 Employee benefit obligations 175.0 169.3 Other liabilities and provisions 1,152.4 1,072.4 Total non-current liabilities 4,486.8 4,264.4

Current liabilities Borrowings, other debt instruments and finance lease liabilities 20 1,151.7 1,687.6 Derivative financial instruments 21.1 72.7 Trade payables 2,351.7 2,201.7 Current tax payables 472.5 210.0 Employee benefit obligations 129.1 145.3 Other liabilities and provisions 2,209.7 1,877.0 Total current liabilities 6,335.8 6,194.3 Total liabilities 10,822.6 10,458.7 Total equity and liabilities 22,777.8 21,171.2

The Notes to the interim condensed consolidated financial statements, presented on pages 8 to 25, are an integral part of the statements

(This is a translation of a document originally issued in Polish)

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 (PLNm)

CONSOLIDATED STATEMENT OF CASH FLOWS (prepared using the indirect method)ŚR 9 months ended 9 months ended Sep 30 2018 Sep 30 2017 Note (unaudited) (unaudited)

Cash flows from operating activities Net profit 1,487.3 1,187.1 Adjustments: 457.7 1,050.8 Income tax 14.1 617.8 525.6 Share in net profit/(loss) of equity-accounted joint ventures (3.1) (2.8) Depreciation and amortisation 8; 9 541.9 639.4 Foreign exchange (gains)/losses 66.5 (25.4) Interest and dividends 97.0 113.8 (Gain)/loss from investing activities (5.9) 4.4 Impairment losses on property, plant and equipment and intangible assets 11 0.1 9,2 Settlement and valuation of derivative financial instruments 12 (17.8) (232.0) (Increase) in trade receivables (298.2) (394.4) (Increase)/Decrease in other assets (8.2) 130.1 (Increase)/Decrease in inventories (962.0) 67.4 Increase/(Decrease) in trade payables 150.0 (41.4) Increase in other liabilities and provisions 289.8 262.4 (Decrease) in employee benefit obligations (10.2) (5.5) Income tax paid (249.3) (125.1) Net cash from operating activities 1,695.7 2,112.8

Cash flows from investing activities Dividends received – equity-accounted joint ventures 3.2 2.1 Dividends received from other entities 1.7 1.7 Interest received 4.1 7,3 Sale of property, plant and equipment and intangible assets 11.1 4.8 Purchase of property, plant and equipment and intangible assets (637.0) (1,130.6) Cash contributions – equity-accounted joint ventures (0.1) (5.4) Deposits 8.0 - Security deposit (margin) 53.2 17,9 Funds for future costs of decommissioning of oil and gas extraction (37.1) - facilities Settlement of derivative financial instruments 11.9 - Other cash used in investing activities - (2.3) Net cash from investing activities (581.0) (1,104.5)

Cash flows from financing activities Proceeds from bank borrowings 20 243.6 746,6 Issue of notes 20 110.0 296.1 Repayment of bank borrowings 20 (737.0) (768.6) Repayment of non-bank borrowings 20 (9.6) (9.7) Redemption of notes 20 (214.8) (160.2) Interest paid 20 (158.7) (151.7) Dividends paid (184.9) (184.9) Decrease in finance lease liabilities 20 (25.7) (27.0) Settlement of derivative financial instruments 52.9 54.9 Net cash from financing activities (924.2) (204.5)

Total net cash flow 190.5 803,8 Effect of exchange rate fluctuations on cash held 6.9 (5.1) Change in net cash 197.4 798.7 Cash at beginning of period 1,920.6 730,8 Cash at end of period 19 2,118.0 1,529.5

The Notes to the interim condensed consolidated financial statements, presented on pages 8 to 25, are an integral part of the statements

(This is a translation of a document originally issued in Polish)

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 (PLNm)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Equity Non- Share Cash flow hedging Retained Translation attributable to Share capital controlling Total equity premium reserve earnings reserve owners of the interests Parent Note

January 1 2018 (audited) 184.9 2,228.3 (225.2) 8,432.2 92.2 10,712.4 0.1 10,712.5 Effect of changes in accounting policies 4.1 - - - (8.7) - (8.7) - (8.7)

January 1 2018 (unaudited) 184.9 2,228.3 (225.2) 8,423.5 92.2 10,703.7 0.1 10,703.8 Net profit 15 - - - 1,487.3 - 1,487.3 - 1,487.3 Other comprehensive income/(loss), net - - (59.9) 0.1 8.8 (51.0) - (51.0)

Total comprehensive income/(loss) - - (59.9) 1,487.4 8.8 1,436.3 - 1,436.3

Dividend 16 - - - (184.9) - (184.9) - (184.9)

September 30 2018 (unaudited) 184.9 2,228.3 (285.1) 9,726.0 101.0 11,955.1 0.1 11,955.2

January 1 2017 (audited) 184.9 2,228.3 (812.8) 6,945.4 65.0 8,610.8 0.1 8,610.9 Net profit 15 - - - 1,187.1 - 1,187.1 - 1,187.1 Other comprehensive income/(loss), net - - 440.6 - 12.4 453.0 - 453.0

Total comprehensive income/(loss) - - 440.6 1,187.1 12.4 1,640.1 - 1,640.1

Dividend - - - (184.9) - (184.9) - (184.9)

September 30 2017 (unaudited) 184.9 2,228.3 (372.2) 7,947.6 77.4 10,066.0 0.1 10,066.1

The Notes to the interim condensed consolidated financial statements, presented on pages 8 to 25, are an integral part of the statements

(This is a translation of a document originally issued in Polish)

7 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

NOTES TO THE FINANCIAL STATEMENTS

1. General information Grupa LOTOS Spółka Akcyjna (“Grupa LOTOS S.A.”, the “Company”, the “Parent”), was established on September 18th 1991. The Company’s registered address is: ul. Elbląska 135, 80-718 Gdańsk, Poland.

The principal business activity of Grupa LOTOS S.A.’s Group (the “LOTOS Group” or the “Group”) consists in the manufacturing and processing of refined petroleum products and their wholesale and retail sale. The Group’s business also includes acquisition of crude oil and natural gas deposits and oil and gas production. Based on the classification applied by the Warsaw Stock Exchange, Grupa LOTOS S.A. is included in the fuel sector.

2. Composition of the Group The LOTOS Group comprises: Grupa LOTOS S.A. (the Parent), a number of production, service and trading companies which are direct or indirect subsidiaries of Grupa LOTOS S.A., and a foundation.

In addition, the Group holds interests in equity-accounted joint ventures. Information on the registered addresses and business profiles of the abovementioned entities, as well as on the Group’s ownership interests in those entities, is presented below.

Registered Name Business profile The Group’s ownership interest office Sep 30 2018 Dec 31 2017 Sep 30 2017 Parent Downstream segment Manufacturing and processing of refined Not Not Not • Grupa LOTOS S.A. Gdańsk petroleum products (mainly fuels) and applicable applicable applicable their wholesale Direct fully-consolidated subsidiaries Upstream segment • LOTOS Upstream Sp. z o.o. (parent of another group: LOTOS Upstream Gdańsk Activities of head offices and holdings 100.00% 100.00% 100.00% Group) • LOTOS Petrobaltic S.A. (parent of Acquisition of crude oil and natural gas another group: LOTOS Petrobaltic Gdańsk 99.99% 99.99% 99.99% deposits, extraction of hydrocarbons Group) Downstream segment Wholesale and retail sale of fuels and • LOTOS Paliwa Sp. z o.o. Gdańsk light fuel oil, management of the LOTOS 100.00% 100.00% 100.00% service station network Manufacturing and sale of lubricating • LOTOS Oil Sp. z o.o. Gdańsk oils and lubricants, and sale of base 100.00% 100.00% 100.00% oils • LOTOS Asfalt Sp. z o.o. Gdańsk Manufacturing and sale of bitumens 100.00% 100.00% 100.00% • LOTOS Kolej Sp. z o.o. Gdańsk Railway transport 100.00% 100.00% 100.00% Maintenance of mechanical and • LOTOS Serwis Sp. z o.o. Gdańsk electric operations and controlling 100.00% 100.00% 100.00% devices, overhaul and repair services • LOTOS Lab Sp. z o.o. (parent of Gdańsk Laboratory testing 100.00% 100.00% 100.00% another group: LOTOS Lab Group) • LOTOS Straż Sp. z o.o. Gdańsk Fire service activities 100.00% 100.00% 100.00% • LOTOS Ochrona Sp. z o.o. Gdańsk Security services 100.00% 100.00% 100.00% • LOTOS Terminale S.A. (parent of Czechowice another group: LOTOS Terminale Storage and distribution of fuels 100.00% 100.00% 100.00% -Dziedzice Group) • LOTOS Infrastruktura S.A. (parent Storage and distribution of fuels, renting of another group: LOTOS Jasło and operating of own or leased real 100.00% 100.00% 100.00% Infrastruktura Group) estate • LOTOS Gaz S.A. w likwidacji (in Kraków Dormant 100.00% 100.00% 100.00% liquidation) Non-consolidated direct subsidiaries (1) • Infrastruktura Kolejowa Sp. z o.o. Gdańsk Dormant 100.00% 100.00% 100.00% (in liquidation) (2) Socially beneficial activity within the scope of public tasks defined in the Act ● LOTOS Foundation Gdańsk on Public Benefit and Volunteer Work. 100.00% 100.00% 100.00% The Foundation does not conduct any business activity.

(This is a translation of a document originally issued in Polish) 8 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

Registered Group’s ownership interest Name Description of business office Sep 30 2018 Dec 31 2017 Sep 30 2017 Indirect fully-consolidated subsidiaries Downstream segment LOTOS Lab Group • LOTOS Vera Sp. z o.o. Warsaw Manufacture of cars 100.00% 100.00% - LOTOS Infrastruktura Group Czechowice- Production and distribution of • RCEkoenergia Sp. z o.o. 100.00% 100.00% 100.00% Dziedzice electricity, heat and gas LOTOS Terminale Group Czechowice- Production of fatty acid methyl esters • LOTOS Biopaliwa Sp. z o.o. 100.00% 100.00% 100.00% Dziedzice (FAME) Upstream segment LOTOS Upstream Group Crude oil exploration and production • LOTOS Exploration and Norway, on the Norwegian Continental Shelf, 100.00% 100.00% 99.99% Production Norge AS Stavanger provision of services incidental to oil and gas exploration and production • AB LOTOS Geonafta (parent of Crude oil exploration and production, Lithuania, another group: AB LOTOS drilling services, and purchase and 100.00% 100.00% 99.99% Gargždai Geonafta Group) sale of crude oil Lithuania, • UAB Genciu Nafta Crude oil exploration and production 100.00% 100.00% 99.99% Gargždai Lithuania, • UAB Manifoldas Crude oil exploration and production 100.00% 100.00% 99.99% Gargždai

London, United Exploration for and production of crude • LOTOS Upstream UK Ltd. 100.00% (3) - - Kingdom oil and gas

LOTOS Petrobaltic Group • Aphrodite Offshore Services N.V. Curaçao Dormant - (4) 99.99% 99.99% Support activities for extraction and • B8 Sp. z o.o. Gdańsk 99.99% 99.99% 99.99% quarrying operations • B8 Spółka z ograniczoną Exploration for and production of crude odpowiedzialnością BALTIC Gdańsk 99.99% 99.99% 99.99% oil and natural gas S.K.A. • Miliana Shipholding Company Ltd. Storage and transport of crude oil, (parent of another group: Miliana Nicosia, Cyprus 99.99% 99.99% 99.99% other sea transport services Shipholding Company Group) • Technical Ship Management Sp. z o.o. (parent of another Sea transport support activities, ship Gdańsk 99.99% 99.99% 99.99% group: Technical Ship operation advisory services Management Group) Provision of sea transport and related • SPV Baltic Sp. z o.o. Gdańsk 99.99% 99.99% 99.99% services Support activities for oil and gas • SPV Petro Sp. z o.o. (5) Gdańsk production, sea transport, ship 99.99% - - operation advisory services Provision of sea transport and related • Miliana Shipmanagement Ltd. Nicosia, Cyprus 99.99% 99.99% 99.99% services • Miliana Shipping Group Ltd. (parent of another group: Nicosia, Cyprus Management of own assets 99.99% 99.99% 99.99% Miliana Shipping Group) • Bazalt Navigation Nicosia, Cyprus Ship chartering 99.99% 99.99% 99.99% Company Ltd. • Granit Navigation Nicosia, Cyprus Ship chartering 99.99% 99.99% 99.99% Company Ltd. • Kambr Navigation Nicosia, Cyprus Ship chartering 99.99% 99.99% 99.99% Company Ltd. • St. Barbara Navigation Nicosia, Cyprus Ship chartering 99.99% 99.99% 99.99% Company Ltd. • Petro Icarus Company Ltd. Nicosia, Cyprus Ship chartering 99.99% 99.99% 99.99% • Petro Aphrodite Company Nicosia, Cyprus Ship chartering 99.99% 99.99% 99.99% Ltd. Production of electricity, heat, LPG and • Energobaltic Sp. z o.o. Władysławowo 99.99% 99.99% 99.99% natural gas condensate

(This is a translation of a document originally issued in Polish) 9 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

Registered Group’s ownership interest Name Business profile office Sep 30 2018 Dec 31 2017 Sep 30 2017 Equity-accounted joint ventures Downstream segment • LOTOS - Air BP Polska Sp. z o.o. (6) Gdańsk Sale of aviation fuel and logistics services 50.00% 50.00% 50.00% Upstream segment LOTOS Upstream Group Crude oil and gas production (support • Baltic Gas Sp. z o.o. (7) Gdańsk 49.99% 49.99% 49.99% activities for oil and gas production) • Baltic Gas spółka z ograniczoną Gdańsk Crude oil and gas production 44.78% 44.78% 44.78% odpowiedzialnością i wspólnicy sp.k. (7) AB LOTOS Geonafta Group Lithuania, • UAB Minijos Nafta (8) Crude oil exploration and production 49.99% 49.99% 49.99% Gargždai

(1) The companies were excluded from consolidation due to immateriality of the amounts disclosed in their financial statements as at September 30th 2018 (IFRS 10 Consolidated Financial Statements). (2) On June 28th 2018, the Extraordinary General Meeting of Infrastruktura Kolejowa Sp. z o.o passed a resolution to dissolve the company and put it into liquidation. (3) A new company with a share capital of GBP 15 thousand. A wholly-owned subsidiary of LOTOS Upstream Sp. z o.o. (4) In H1 2018, the company was liquidated. (5) A new company with a share capital of PLN 5 thousand; a wholly-owned subsidiary of Technical Ship Management Sp. z o.o. (6) Joint venture agreement between Grupa LOTOS S.A. and BP Europe SE on joint operations related to supply of aviation fuel through LOTOS-Air BP Polska Sp. z o.o. (7) Agreement on cooperation between LOTOS Upstream Sp. z o.o. and CalEnergy Resources Poland Sp. z o.o. with respect to development and production of gas and condensate reserves from the B-4 and B-6 fields in the Baltic Sea, performed through special purpose vehicles Baltic Gas spółka z ograniczoną odpowiedzialnością i wspólnicy sp.k. and Baltic Gas Sp. z o.o. (general partner). Within the meaning of IFRS 11, Baltic Gas Sp. z o.o. i wspólnicy sp.k. and Baltic Gas Sp. z o.o. are the Group’s equity-accounted joint ventures. (8) Joint venture set up for the purpose of oil exploration and production in Lithuania, operated in the form of UAB Minijos Nafta.

3. Changes in the entity’s structure in the interim period, including changes which follow from mergers, acquisitions or sale of subsidiaries, long-term investments, restructuring or discontinuation of business Since the end of the previous financial year, i.e. December 31st 2017 (see Note 2 to the consolidated financial statements for 2017), there have been no material changes in the structure of the Group.

4. Basis of preparation and presentation These interim condensed consolidated financial statements of the LOTOS Group (the “interim consolidated financial statements”, “interim financial statements”, “consolidated financial statements”, “financial statements”) have been prepared in accordance with EU-endorsed International Accounting Standard 34 Interim Financial Reporting (“IAS 34”).

These interim condensed consolidated financial statements present the financial position of the Group as at September 30th 2018 and December 31st 2017, the results of the Group’s operations for the three and nine months ended September 30th 2018 and September 30th 2017, and cash flows for the nine months ended September 30th 2018 and September 30th 2017.

These interim financial statements should be read in conjunction with the audited consolidated financial statements of the LOTOS Group for 2017, issued on March 7th 2018 (the “consolidated financial statements for 2017”).

These interim condensed consolidated financial statements have been prepared on the assumption that the Group companies will continue as going concerns in the foreseeable future. As at the date of authorisation of these financial statements for issue, no circumstances were identified which would indicate any threat to the Group companies’ continuing as going concerns.

The Parent’s functional currency and the reporting currency of these interim consolidated financial statements is the Polish złoty, and all amounts presented herein, unless indicated otherwise, are stated in millions of złoty.

4.1 Accounting policies The accounting policies and calculation methods applied in the preparation of these interim condensed consolidated financial statements are the same as those applied in the preparation of the consolidated financial statements for 2017 (see Note 7 to the consolidated financial statements for 2017), except for the policies which were introduced following the adoption of new standards IFRS 9 and IFRS 15 as of January 1st 2018. There were no changes in comparative data or corrections of errors. For a discussion of the effect of the new IFRS 9 and IFRS 15 standards on the Group’s accounting policies, see Note 4 to the consolidated financial statements for 2017. The standards were implemented using the modified retrospective method, according to which the comparative data is not restated. The IFRS 9 standard had no significant effect on these consolidated financial statements; therefore, no temporary adjustment was made as at January 1st 2018. The effect of implementation of IFRS 15 on the Group’s equity as at January 1st 2018, amounting to PLN 8.7m, is presented under Effect of changes in accounting policies in the consolidated statement of changes in equity. The adjustment relates to a change in the method of accounting for transactions in a situation where the distribution of hydrocarbons produced from the Norwegian fields differs from the structure of the respective interest holders’ interests.

(This is a translation of a document originally issued in Polish) 10 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

IFRS 15 Revenue from Contracts with Customers

IFRS 15 introduces a five-step model to be followed in order to appropriately recognise revenue from contracts with customers. The new model provides precise guidance for the identification of contracts and performance obligations, determination of the transaction price, allocation of consideration to performance obligations, and the moment of revenue recognition. In addition, under IFRS 15 revenue is recognised as control is passed and not, as earlier, when risks and rewards are transferred.

The Group changed its accounting policy for recognising revenue from sale of hydrocarbons produced from the fields on the Norwegian Continental Shelf in which the Group holds interests. Previously, the Group applied the entitlement (rights) method, according to which revenue is always recognised in the books in proportion to the Group’s share in production from the field. Under the newly adopted sales method, revenue is recognised when the product is transferred to the buyer and all performance obligations set forth in IFRS 15 are met. The Group believes that the replacement of the previously applied entitlement method with the sales method affects the timing of revenue recognition and improves compliance with IFRS 15. The share in production from a field which has not been sold is recognised in accordance with IAS 2 and presented in the consolidated statement of financial position under Inventories.

For logistical reasons, when hydrocarbons are produced from a field by a number of interest holders there are natural differences between the volumes actually produced by the individual interest holders and their respective contractual shares in production. In accordance with the sales method adopted by the Group, the overlift party, i.e. the interest holder who, in a given production cycle, produces hydrocarbons in excess of its contractual share in production from the field, recognises the excess in its accounting books as a liability rather than revenue. Any differences are settled among interest holders in kind (produced hydrocarbons). The Group measures the related liability on the basis of the average six-month cost. Revaluation of such liability is recognised in the consolidated statement of comprehensive income as adjustment to Cost of sales.

The cumulative effect of changes in accounting policies on the items of the consolidated statement of financial position as at January 1st 2018 is as follows:

Effect of changes in Dec 31 2017 Jan 1 2018 accounting policies

ASSETS 6,236.6 (14.8) 6,221.8 Current assets 6,236.6 (14.8) 6,221.8 Inventories 3,559.6 30.8 3,590.4 Trade receivables 2,677.0 (45.6) 2,631.4

EQUITY AND LIABILITIES 10,843.9 (14.8) 10,829.1 Equity Retained earnings 8,432.2 (8.7) 8,423.5 Non-current liabilities Deferred tax liabilities 210.0 (31.0) 179 Current liabilities Trade payables 2,201.7 24.9 2,226.6

IFRS 9 Financial Instruments

Selected accounting policy

Measurement of financial assets and liabilities

Since January 1st 2018, the Group has been classifying financial assets and financial liabilities into the following categories: • measured at amortised cost, • measured at fair value through other comprehensive income, • measured at fair value through profit or loss.

The Group classifies its assets upon initial recognition.

The Group recognises the following assets and liabilities as assets/liabilities measured at amortised cost: • financial assets: trade receivables, cash and cash equivalents, deposits, security deposits, other receivables, • financial liabilities: bank and other borrowings, notes and bonds, trade payables, other liabilities.

The Group recognises shares in other entities as assets measured at fair value through other comprehensive income.

The Group recognises derivative financial instruments not designated for hedge accounting as assets/liabilities measured at fair value through profit or loss.

Impairment of financial assets

To estimate the impairment of financial assets measured at amortised cost, the Group applies the expected loss model, which is based on the calculation of expected losses, regardless of whether there is any indication of impairment. Previously, the Group applied the incurred loss model. In accordance with IAS 39, with respect to the recognition of impairment losses, the Group was obliged to assess whether there was any evidence of impairment, and if there was such evidence – to estimate the impairment loss.

As regards hedge accounting, the Group did not implement the changes resulting from IFRS 9. As at January 1st 2018, the Group continued to apply hedge accounting in accordance with IAS 39 (see Note 7.24 to the consolidated financial statements for 2017).

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

The table below presents the effect of implementation of IFRS 9 on the change in the classification and measurement of the Group’s financial assets as at January 1st 2018:

IAS 39 IFRS 9 Measurement at fair value Categories and classes of Measurement Impact of Measurement at through: financial instruments defined in at fair value Measurement at change Jan 1 amortised/historical Other IAS 39 through profit amortised cost Profit or 2018 cost comprehensive or loss loss income

Financial assets at fair value through profit or loss – held for - 164.5 - 164.5 - - trading:

Derivative financial instruments - 164.5 - 164.5 - - Loans and receivables 5,047.5 - 5,047.5 - - - Trade receivables 2,677.0 - 2,677.0 - - - Cash and cash equivalents 1,920.7 - 1,920.7 - - - Other financial assets 449.8 - 449.8 - - - Financial assets available for sale 9.8 - - - 9.8 - Shares* 9.8 - - - 9.8 -

* Measured at historical cost.

4.2 New standards and interpretations which have been published but are not yet effective New standards, amendments to the existing standards and interpretations which were published after December 31st 2017 and which have not been endorsed by the European Union:

• Amendments to References to the Conceptual Framework in IFRS Standards, issued on March 29th 2018 (effective for annual periods beginning on or after January 1st 2020)

The Group has not elected to early adopt any of the standards, interpretations or amendments which have not taken effect. The Company’s Management Board is analysing the effect of the new standards, interpretations and amendments on the accounting policies applied by the Group and on the Group’s future financial statements.

IFRS 16 Leases is effective for annual periods beginning on or after January 1st 2019. In the Management Board’s opinion, the new standard may have an effect on the accounting policies applied. Under IFRS 16, all lease contracts (with few exceptions), including those currently classified as operating leases, will be recognised as a right-of-use asset and as a lease liability in the statement of financial position. The Group plans to implement the standard using the modified retrospective method, with the cumulative effect of the first application of IFRS 16 recognised as at January 1st 2019, without restating the comparative data.

The Group is currently analysing all concluded agreements to identify those to which the new recognition method applies following the implementation of IFRS 16. The Group identified key areas for the analysis, including leases of rolling stock, land and service stations, perpetual usufruct rights to land and mining rights, as well as transmission easements and other rights. The Group is developing its accounting policy compliant with IFRS 16 Leases, including a method of marginal interest rate determination.

4.3 Exchange rates The following exchange rates, determined on the basis of the exchange rates quoted by the National Bank of Poland (the “NBP”), have been used for the purpose of valuation of items of the statement of financial position and translation of the financial statements of foreign entities and corporate groups into the Polish złoty: NBP’s mid rate quoted for: Sep 30 2018 (1) Dec 31 2017 (2) USD 3.6754 3.4813 EUR 4.2714 4.1709 GBP 4.8055 4.7001 NOK 0.4503 0.4239 (1) NBP’s mid rates table effective for September 30th 2018. (2) NBP’s mid rates table effective for December 31st 2017.

9 months ended 9 months ended NBP’s average mid rate for the reporting period Sep 30 2018 (1) Sep 30 2017 (2) USD 3.5688 3.8043 EUR 4.2535 4.2566 GBP 4.8111 4.8711 NOK 0.4436 0.4607 (1) Based on the arithmetic mean of the mid rates quoted by the NBP for the last day of each full month in the period January 1st – September 30th 2018. (2) Based on the arithmetic mean of the mid rates quoted by the NBP for the last day of each full month in the period January 1st – September 30th 2017.

(This is a translation of a document originally issued in Polish) 12 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

5. Seasonality and cyclicality of business in the reporting period There was no seasonality or cyclicality in the Group’s business in the reporting period.

6. Material changes to reporting items, including amounts which significantly affect assets, liabilities, equity, net profit/(loss) or cash flows and which are non-typical due to their nature, value, effect or frequency All material changes to reporting items after the end of the last annual reporting period, i.e. 2017, are presented in the key sections of the financial statements and supplemented with additional information contained in the relevant notes to the financial statements.

For a discussion of changes to material reporting items and factors with a bearing on the Group’s financial performance in the reporting period, as well as a short summary of results achieved by each business segment, see the Management’s Discussion and Analysis of the Q3 2018 consolidated financial performance.

7. Changes to estimates reported in previous interim periods of the current financial year or in previous financial years, where they have a material effect on the current interim period The Group did not identify any material changes to estimated amounts reported in prior periods, where such changes would have a material effect on the current interim reporting period.

8. Business segments

Consolidation Upstream segment Downstream segment Consolidated adjustments

3 months ended Sep 30 2018 2017 2018 2017 2018 2017 2018 2017 (unaudited) Revenue: 374.5 256.0 8,136.6 6,098.0 (167.1) (91.5) 8,344.0 6,262.5 Intersegment sales 154.2 77.1 12.9 14.4 (167.1) (91.5) - - External sales 220.3 178.9 8,123.7 6,083.6 - - 8,344.0 6,262.5 Operating profit/(loss) 146.0 98.8 735.1 650.4 (14.3) 7.3 866.8 756.5 (EBIT) Depreciation and 50.6 69.2 124.1 132.9 - - 174.7 202.1 amortisation Operating profit/(loss) before depreciation and 196.6 168.0 859.2 783.3 (14.3) 7.3 1,041.5 958.6 amortisation (EBITDA) 9 months ended Sep 30 2018 2017 2018 2017 2018 2017 2018 2017 (unaudited) Revenue: 1,040.0 968.9 21,532.8 16,534.8 (373.1) (339.0) 22,199.7 17,164.7 Intersegment sales 332.7 296.4 40.4 42.6 (373.1) (339.0) - - External sales 707.3 672.5 21,492.4 16,492.2 - - 22,199.7 17,164.7 Operating profit/(loss) 468.4 404.9 1,744.6 1,099.8 (0.5) 1.2 2,212.5 1,505.9 (EBIT) Depreciation and 169.6 232.1 372.3 408.0 - (0.7) 541.9 639.4 amortisation Operating profit/(loss) before depreciation and 638.0 637.0 2,116.9 1,507.8 (0.5) 0.5 2,754.4 2,145.3 amortisation (EBITDA)

Sep 30 Dec 31 Sep 30 Dec 31 Sep 30 Dec 31 Sep 30 Dec 31

2018 2017 2018 2017 2018 2017 2018 2017 (unaudited) (audited) (unaudited) (audited) (unaudited) (audited) (unaudited) (audited) Total assets 4,405.0 4,267.1 20,264.9 18,744.6 (1,892.1) (1,840.5) 22,777.8 21,171.2

Upstream segment Downstream segment Consolidated Geographical structure 3 months ended Sep 30 2018 2017 2018 2017 2018 2017 Domestic sales: 0.3 0.9 7,260.1 5,088.5 7,260.4 5,089.4 products and services - 0.8 6,947.8 4,872.3 6,947.8 4,873.1 merchandise and materials 0.3 0.1 312.3 216.2 312.6 216.3 Export sales: 220.0 178.0 863.6 995.1 1,083.6 1,173.1 products and services 220.0 178.0 816.3 933.9 1,036.3 1,111.9 merchandise and materials - - 47.3 61.2 47.3 61.2 Total 220.3 178.9 8,123.7 6,083.6 8,344.0 6,262.5

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

9 months ended Sep 30 2018 2017 2018 2017 2018 2017 Domestic sales: 5.0 3.8 17,658.4 13,576.9 17,663.4 13,580.7 products and services 4.2 3.6 16,635.7 12,799.5 16,639.9 12,803.1 merchandise and materials 0.8 0.2 1,022.7 777.4 1,023.5 777.6 Export sales: 702.3 668.7 3,834.0 2,915.3 4,536.3 3,584.0 products and services 702.2 668.6 3,660.1 2,727.0 4,362.3 3,395.6 merchandise and materials 0.1 0.1 173.9 188.3 174.0 188.4 Total 707.3 672.5 21,492.4 16,492.2 22,199.7 17,164.7

Upstream segment Downstream segment Consolidated Sales by type of products, merchandise and 3 months ended Sep 30 services 2018 2017 2018 2017 2018 2017 Gasolines - - 1,270.4 943.3 1,270.4 943.3 Naphtha - - 292.2 138.4 292.2 138.4 Diesel oils - - 4,333.5 3,186.3 4,333.5 3,186.3 Bunker fuel - - 49.0 30.8 49.0 30.8 Light fuel oil - - 124.2 144.6 124.2 144.6 Heavy fuel oil - - 365.3 267.4 365.3 267.4 Aviation fuel - - 394.7 259.4 394.7 259.4 Lubricants - - 72.6 82.1 72.6 82.1 Base oils - - 152.3 128.1 152.3 128.1 Bitumens - - 531.5 370.1 531.5 370.1 LPG - - 142.5 149.3 142.5 149.3 Crude oil 73.7 46.3 - - 73.7 46.3 Natural gas 137.7 119.9 - - 137.7 119.9 Other refinery products, merchandise and - - 186.7 178.3 186.7 178.3 materials Other products, merchandise and materials 8.9 0.9 146.0 123.1 154.9 124.0 Services - 11.8 91.8 104.1 91.8 115.9 Effect of cash flow hedge accounting - - (29.0) (21.7) (29.0) (21.7) Total 220.3 178.9 8,123.7 6,083.6 8,344.0 6,262.5

9 months ended Sep 30 2018 2017 2018 2017 2018 2017 Gasolines - - 3,428.0 2,692.8 3,428.0 2,692.8 Naphtha - - 886.4 534.0 886.4 534.0 Diesel oils - - 10,888.5 8,614.1 10,888.5 8,614.1 Bunker fuel - - 139.9 91.5 139.9 91.5 Light fuel oil - - 414.6 445.3 414.6 445.3 Heavy fuel oil - - 1,365.9 909.2 1,365.9 909.2 Aviation fuel - - 1,042.9 599.6 1,042.9 599.6 Lubricants - - 216.9 214.1 216.9 214.1 Base oils - - 428.5 376.6 428.5 376.6 Bitumens - - 889.8 718.2 889.8 718.2 LPG - - 375.7 369.5 375.7 369.5 Crude oil 212.2 187.9 320.8 - 533.0 187.9 Natural gas 458.9 438.8 0.3 - 459.2 438.8 Other refinery products, merchandise and 0.2 - 458.6 375.1 458.8 375.1 materials Other products, merchandise and materials 26.7 3.8 404.5 341.1 431.2 344.9 Services 9.3 42.0 278.7 303.2 288.0 345.2 Effect of cash flow hedge accounting - - (47.6) (92.1) (47.6) (92.1) Total 707.3 672.5 21,492.4 16,492.2 22,199.7 17,164.7

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

9. Expenses by nature

3 months ended 9 months ended 3 months ended 9 months ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 Note (unaudited) (unaudited) (unaudited) (unaudited) Depreciation and amortisation 8 174.7 541.9 202.1 639.4 Raw materials and consumables used(1) 6,409.5 16,749.5 4,361.8 12,144.5 Services 385.5 1,097.1 354.4 1,138.8 Taxes and charges 142.1 403.7 129.2 371.3 Employee benefits expense 185.4 563.5 175.6 551.8 Other expenses by nature 64.7 179.9 67.3 184.8 Merchandise and materials sold 330.5 1,052.7 214.8 804.2 Total expenses by nature 7,692.4 20,588.3 5,505.2 15,834.8 Change in products and adjustments to cost of (227.5) (605.9) 2.5 (162.2) sales Total 7,464.9 19,982.4 5,507.7 15,672.6 including: Cost of sales 7,010.8 18,682.2 5,064.1 14,430.6 Distribution costs 348.6 995.7 330.5 913.9 Administrative expenses 105.5 304.5 113.1 328.1 (1) Including foreign exchange losses related to operating activities, recognised in cost of sales for the three and nine months ended September 30th 2018: PLN 2.4m and PLN 66.0m, respectively (for the three and nine months ended September 30th 2017: foreign exchange losses of PLN 15.1m and PLN 8.1m, respectively).

10. Other income

3 months ended 9 months ended 3 months ended 9 months ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited) Gain on disposal of non-financial non-current assets 6.8 5.7 0.1 1.6 Grants 0.4 8.7 0.5 12.3 Provisions - - - 9.9 Compensation 1.6 7.6 4.0 5.8 Excise duty refunds (1) - - - 1.6 Other 0.9 4.8 1.8 5.0 Total 9.7 26.8 6.4 36.2 (1) Refund of excise duty unduly paid in earlier periods and deductions due to consumption of components or additives used in manufacture of finished products for which excise duty had been settled at earlier stages of the trading process.

11. Other expenses

3 months 9 months 3 months 9 months ended ended ended ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 Note (unaudited) (unaudited) (unaudited) (unaudited) Impairment losses on property, plant and equipment - 0.1 - 9.2 and intangible assets, including: - impairment loss on property, plant and equipment related to gas pipeline infrastructure on the B-3 17 - - - 9.3 field - other - 0.1 - (0.1) Impairment losses on receivables 0.4 1.7 - 0.7 Provisions 18.0 17.9 2.3 - - remeasurement of provision for contingent payments − Sleipner assets acquisition 21 18.2 18.2 - - agreement - other provisions (0.2) (0.3) 2.3 - Fines and compensation 0.5 1.9 0.3 2.9 Damage to property arising in ordinary course of 0.8 1.5 0.5 1.8 business Membership fees 0.1 1.0 0.1 0.9 Charitable donations - 2.4 0.4 3.5 Other 2.2 5.1 1.1 3.4 Total 22.0 31.6 4.7 22.4

The Group offsets similar transaction items in accordance with IAS 1 Presentation of Financial Statements, sections 34 and 35. Material items of income and expenses charged to profit or loss are disclosed separately, as presented in the tables above.

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

12. Finance income

3 months ended 9 months ended 3 months ended 9 months ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited) Dividends - 5.3 - 4.2 Interest: 8.9 24.6 5.5 14.8 - on trade receivables 0.8 2.1 0.5 2.1 - on cash 0.6 2.2 1.1 2.3 - on deposits 7.5 19.9 3.9 8.8 - other - 0.4 - 1.6 Exchange differences: - - 79.1 122.3 - on bank borrowings - - 27.4 136.8 - on translation of intercompany loans (1) - - 26.1 (42.0) - on realised foreign-currency transactions in bank - - 17.8 20.5 accounts - on notes, including intercompany notes (1) - - 15.5 12.6 - on deposits and other cash - - (5.0) (8.2) - other - - (2.7) 2.6 Revaluation of derivative financial instruments: 26.6 17.8 30.2 232.0 - measurement 3.7 (47.0) (33.6) 179.0 - settlement 22.9 64.8 63.8 53.0 Other 1.0 3.1 - - Total 36.5 50.8 114.8 373.3

13. Finance costs

3 months 9 months 3 months 9 months ended ended ended ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 Note (unaudited) (unaudited) (unaudited) (unaudited) Interest: 44.5 133.8 49.3 155.9 - on bank borrowings 25.6 72.4 28.3 91.0 - on non-bank borrowings 0.7 2.2 0.9 2.7 - on notes 1.8 9.5 3.4 10.1 - on finance lease liabilities 5.7 15.1 4.5 14.2 - discount on provisions for oil and natural gas production facilities and for site 8.7 29.3 9.2 31.2 restoration, and other provisions 21 - cost of discount on employee benefit 1.4 4.1 1.5 4.4 obligations - other 0.6 1.2 1.5 2.3 Exchange differences: 5.6 13.4 - - - on bank borrowings (17.6) 61.8 - - - on translation of intercompany loans (1) 14.7 (42.8) - - - on realised foreign-currency transactions in 8.3 (11.3) - - bank accounts - on notes (1.3) 8.5 - - - on deposits and other cash 2.4 (4.6) - - - other (0.9) 1.8 - - Bank fees 3.6 14.0 4.3 12.3 Other - 0.1 0.3 1.1 Total 53.7 161.3 53.9 169.3

(1) According to IAS 21 The Effects of Changes in Foreign Exchange Rates, foreign exchange gains and losses on intercompany foreign currency transactions are recognised in the Group’s net profit or loss.

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

14. Income tax 14.1 Tax expense

3 months ended 9 months ended 3 months ended 9 months ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited) Current tax 199.7 536.1 179.8 288.4 Deferred tax 20.7 81.7 20.4 237.2 Total income tax charged to net profit or loss 220.4 617.8 200.2 525.6

Tax expense recognised in other comprehensive 13.4 (13.8) 12.3 103.3 income/(loss), net, relating to cash flow hedges

For the entities operating in Poland, the current and deferred portion of income tax was calculated at the rate of 19%.

In the case of Norwegian subsidiary LOTOS Exploration and Production Norge AS, the marginal tax rate is 78% of the tax base. Income earned by this subsidiary is subject to taxation under two parallel tax systems: the corporate income tax system (23% tax rate) and the petroleum tax system (additional tax rate of 55%).

In the case of Lithuanian subsidiaries (AB LOTOS Geonafta Group), the current and deferred portion of income tax was calculated at the rate of 15%.

14.2 Deferred income tax

Statement of financial position Change Effect of changes in Dec 31 2017 Jan 1 2018 Sep 30 2018 accounting policies (audited) (unaudited) (unaudited) Deferred tax assets 415.4 - 415.4 440.7 25.3 Deferred tax liabilities (277.7) 31.0 (246.7) (316.5) (69.8) Net deferred tax assets/(liabilities) 137.7 31.0 168.7 124.2 (44.5)

Exchange differences on translating deferred tax of foreign (23.4) operations Deferred tax disclosed under other comprehensive (13.8) income/(loss), net Deferred tax expense (81.7) disclosed under net profit or loss

14.2.1 Deferred tax assets and liabilities

Given that the Group companies are separate taxpayers, the deferred tax (deferred tax assets and liabilities) is calculated separately by individual companies. The Group companies offset deferred tax assets against deferred tax liabilities.

(This is a translation of a document originally issued in Polish) 17 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

Deferred tax assets (liabilities) before set-off comprised the following items: Exchange Effect of Deferred tax differences on Deferred tax changes in disclosed under translating Dec 31 2017 Jan 1 2018 disclosed under Sep 30 2018 accounting other comprehensive deferred tax of net profit or loss policies income/(loss), net foreign operations (audited) (unaudited) (unaudited)

Deferred tax assets Employee benefit obligations 59.1 - 59.1 (4.2) (0.2) 0.3 55.0 Inventory write-downs 0.9 - 0.9 (0.2) - - 0.7 Impairment losses on property, plant and equipment 301.7 - 301.7 (1.1) - 20.6 321.2 and intangible assets Negative fair value of derivative financial instruments 6.0 - 6.0 (4.5) - - 1.5 Exchange differences on revaluation - - - 0.1 - - 0.1 of foreign-currency items Impairment losses on receivables 7.9 - 7.9 - - - 7.9 Finance lease liabilities 26.4 - 26.4 10.2 - - 36.6 Provisions for/assets related to decommissioning of crude oil and natural gas extraction facilities 499.4 - 499.4 49.7 - 30.3 579.4 and site restoration Unrealised margin assets 6.7 - 6.7 - - - 6.7 Tax losses carried forward 2.3 - 2.3 0.2 - - 2.5 Other provisions 15.2 - 15.2 13.3 - - 28.5 Cash flow hedge accounting 52.9 - 52.9 - 14.0 - 66.9 Other 9.2 - 9.2 0.4 - - 9.6 987.7 - 987.7 63.9 13.8 51.2 1,116.6 Deferred tax liabilities Difference between current tax value and carrying amount 705.9 - 705.9 118.0 - 26.5 850.4 of property, plant and equipment and intangible assets Difference between current tax value and carrying amount 15.5 (31.0) (15.5) 30.1 - (0.5) 14.1 of settlements under joint operations (Norwegian fields) Positive fair value of derivative financial instruments 8.4 - 8.4 1.0 - - 9.4 Exchange differences on revaluation 2.3 - 2.3 (2.3) - - - of foreign-currency items Tax liabilities associated with acquired exploration 15.4 - 15.4 (0.8) - 0.4 15.0 and production licences in Lithuania Accrued interest 46.6 - 46.6 1.0 - - 47.6 Other 55.9 - 55.9 (1.4) - 1.4 55.9 850.0 (31.0) 819.0 145.6 - 27.8 992.4

Net deferred tax assets/(liabilities) 137.7 31.0 168.7 (81.7) 13.8 23.4 124.2

Taxable temporary differences are expected to expire in 2018–2083.

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

15. Earnings per share

3 months 9 months 3 months 9 months

ended ended ended ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited) Net profit attributable to owners of the Parent (PLNm) (A) 631.6 1,487.3 618.8 1,187.1 Weighted average number of shares (million) (B) 184.9 184.9 184.9 184.9 Earnings per share (PLN) (A/B) 3.42 8.04 3.35 6.42

Earnings per share for each reporting period are calculated by dividing net profit for the reporting period by the weighted average number of shares outstanding in the reporting period.

In the three and nine months ended September 30th 2018 and September 30th 2017, diluted earnings per share were equal to basic earnings per share as the Group carried no instruments with a dilutive effect.

16. Dividends As at September 30th 2018 and December 31st 2017, Grupa LOTOS S.A. was restricted in its ability to distribute funds in the form of dividends. The restrictions followed from the credit facility agreement executed on June 27th 2008 for the financing of the 10+ Programme, whereby dividend payment and amounts are subject to certain conditions, including generation of sufficient free cash and achievement of certain levels of financial ratios.

On June 28th 2018, the General Meeting of Grupa LOTOS S.A. passed a resolution on the allocation of the Company’s net profit for 2017. Under the resolution, the 2017 net profit of PLN 1,419.5m is to be applied towards: • dividend payment – PLN 184.9m, • coverage of the 2014 and 2015 net loss – PLN 347.0m, • increase in statutory reserve funds – PLN 887.6m.

The dividend was paid on September 28th 2018. The dividend per share was PLN 1, gross.

(This is a translation of a document originally issued in Polish) 19 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

17. Impairment losses

Non-current assets of the Non-current assets of the Inventories Receivables Total Upstream segment Downstream segment 3 months ended Sep 30 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 At beginning of period (unaudited) 2,000.9 1,890.1 84.4 63.1 4.3 11.2 103.6 162.7 2,193.2 2,127.1 Recognised 0.1 - - - 0.7 0.6 0.7 0.2 1.5 0.8 Exchange differences on translating (38.8) 61.7 ------(38.8) 61.7 foreign operations Used / Reversed - (3.7) (0.1) - - (8.3) (1.1) (1.7) (1.2) (13.7) At end of period (unaudited) 1,962.2 1,948.1 84.3 63.1 5.0 3.5 103.2 161.2 2,154.7 2,175.9

9 months ended Sep 30 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 At beginning of period (audited) 1,863.3 2,044.0 89.8 86.1 4.0 2.1 104.2 165.3 2,061.3 2,297.5 Recognised 0.4 10.1 (1) - - 2.0 9.9 3.8 4.4 6.2 24.4 Exchange differences on translating 98.5 (102.3) ------98.5 (102.3) foreign operations Used / Reversed - (3.7) (5.5) (23.0) (2) (1.0) (8.5) (4.8) (8.5) (11.3) (43.7) At end of period (unaudited) 1,962.2 1,948.1 84.3 63.1 5.0 3.5 103.2 161.2 2,154.7 2,175.9

(1) Including an impairment loss of PLN 9.3m on gas pipeline infrastructure on the B-3 field. Charged to Other expenses in the consolidated statement of comprehensive income (see also Note 11). (2) Including PLN 22.1m of used impairment losses on discontinued investments in refining units (no effect on net profit or loss).

In accordance with IAS 2, inventories are measured at the lower of cost and cost less write-downs to net realisable value.

Changes in impairment losses on property, plant and equipment and intangible assets are recognised under other income or expenses. The effect of revaluation of inventories is taken to cost of sales. The amounts resulting from recognition or reversal of impairment losses on receivables are presented under other income or other expenses (the principal portion) and under finance income or finance costs (the default interest portion).

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

18. Acquisition and sale of property, plant and equipment and intangible assets

9 months ended 9 months ended Sep 30 2018 Sep 30 2017 (unaudited) (unaudited) Purchase of Upstream segment assets 338.9 209.1 Purchase of Downstream segment assets 232.9 836.4 Total 571.8 1,045.5

In the nine months ended September 30th 2018, purchases made in the Upstream segment related mainly to the B-8 field in the Baltic Sea and production from the Sleipner and YME fields in Norway. Purchases in the Downstream segment were mostly associated with the EFRA Project.

In the nine months ended September 30th 2017, purchases made in the Upstream segment related mainly to the B-8 field in the Baltic Sea and production from the Heimdal and Sleipner fields in Norway. Purchases in the Downstream segment were associated with the EFRA Project, construction of the Hydrogen Recovery Unit, and expansion of the service station chain. In Q1–Q3 2017, the Group also purchased catalysts used in the refining process.

As at September 30th 2018, the Group’s future contractual commitments related to purchases of property, plant and equipment and intangible assets, undisclosed in the statement of financial position, were PLN 265.3m (December 31st 2017: PLN 395.0m). As at September 30th 2018, the contracted expenditure was related, among other things, to the EFRA Project, the B-8 field development, upgrade of the unit for solvent-based removal of paraffins, the Hydrogen Recovery Unit (HRU), as well as modernisation of locomotives.

Additionally, in the third quarter of 2018 the Group sold navigation and geotechnical equipment worth PLN 7.3m. Proceeds from the sale are presented in cash flows from investing activities under Sale of property, plant and equipment and intangible assets. Income from the sale of those assets was recognised by the Group in the statement of comprehensive income under Other income (see Note 10). In the nine months ended September 30th 2017, the Group did not sell any material items of property, plant and equipment or intangible assets.

19. Cash and cash equivalents

Sep 30 2018 Sep 30 2017 (unaudited) (unaudited) Cash and cash equivalents in the statement of financial position 2,118.5 1,529.5 Overdraft facilities (0.5) - Total cash and cash equivalents in the statement of cash flows 2,118.0 1,529.5

20. Borrowings, other debt instruments and finance lease liabilities

Sep 30 2018 Dec 31 2017 (unaudited) (audited) Bank borrowings: 3,534.8 3,903.0 - investment facilities contracted for a specific purpose 3,250.4 3,426.9 - working-capital facilities 9.9 139.4 - inventory financing and refinancing facility 740.1 696.8 - funds in bank deposits securing payment of interest and principal (465.6) (360.1) Non-bank borrowings 59.0 68.3 Notes 209.5 313.0 Finance lease liabilities 188.5 141.6 Total 3,991.8 4,425.9 including: non-current 2,840.1 2,738.3 current 1,151.7 1,687.6

9 months ended 9 months ended Sep 30 2018 Sep 30 2017 At beginning of period (audited) 4,425.9 5,557.2 Proceeds from borrowings 243.6 746.6 Issue of notes 110.0 296.1 Repayment of borrowings (746.6) (778.3) Redemption of notes (214.8) (160.2) Decrease in finance lease liabilities (25.7) (27.0) Interest, fees and commissions paid (158.7) (151.7) Interest, fees and commissions accrued 153.0 149.6 Prepayments and accruals 12.7 12.1 Exchange differences 222.4 (690.3) Change in overdraft facilities 0.4 (13.8) Change in deposits securing payment of interest and principal (105.5) (75.5) Acquisition of property, plant and equipment under lease agreements 72.6 1.4 Other 2.5 (1.4) At end of period (unaudited) 3,991.8 4,864.8

(This is a translation of a document originally issued in Polish) 21 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

In the nine months ended September 30th 2018 and September 30th 2017, there were no payment defaults under any credit facility, loan or lease agreements, or other defaults under material provisions of those agreements having an effect on the Group’s financial statements.

In the nine months ended September 30th 2018, proceeds from bank borrowings incurred by the Group amounted to PLN 243.6m and were related to the investment facility of LOTOS Asfalt Sp. z o.o. (PLN 130.4m) and the working capital facility of AB LOTOS Geonafta (PLN 113.2m). In the same period, repayments of bank borrowings amounted to PLN 737m and mainly included repayments under investment facilities of the Parent (PLN 385.6m), credit facilities of LOTOS Exploration and Production Norge AS (PLN 181.4m) and credit facilities of AB LOTOS Geonafta (PLN 131.1m), and were made chiefly to refinance existing debt). These amounts are presented in the statement of cash flows as cash flows from financing activities under: Proceeds from bank borrowings and Repayment of bank borrowings, respectively.

The Group did not incur any non-bank borrowings in the nine months ended September 30th 2018. Repayments of non-bank borrowings in the period amounted to PLN 9.6m and were primarily related to a loan contracted in 2014 in the Upstream segment to finance the purchase of a drilling platform. This amount was disclosed in cash flows from financing activities under Repayment of non-bank borrowings.

In the nine months ended September 30th 2018, proceeds from notes issued by the Group were PLN 110.0m and related to the SPV B8 Spółka z ograniczoną odpowiedzialnością Baltic S.K.A. Cash outflows on note redemptions in the period amounted to PLN 214.8m and were related to LOTOS Petrobaltic S.A. (PLN 113.8m) and B8 Spółka z ograniczoną odpowiedzialnością Baltic S.K.A. (PLN 101.0m). These amounts are presented in the statement of cash flows as cash flows from financing activities under: Issue of notes and Redemption of notes, respectively.

In 2016, the SPV B8 Spółka z ograniczoną odpowiedzialnością Baltic S.K.A. (Upstream segment) entered into agreements with Bank Gospodarstwa Krajowego S.A. (BGK) and Polski Fundusz Rozwoju S.A. (the Polish Development Fund, PFR) (Fundusz Inwestycji Infrastrukturalnych – Dłużny Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych, PFR) for the financing of the development of the B8 oil field in the Baltic Sea, including senior notes and subordinated notes programme agreements. As at September 30th 2018, the liability under the outstanding notes issued by B8 Spółka z ograniczoną odpowiedzialnością Baltic S.K.A., net of issue costs, was PLN 209.5m. As at June 30th 2018, due to an event of default under the terms and conditions of the notes, there were grounds for their early redemption at the option of PFR and BGK. The financing entities did not notify the Group of their intention to exercise this right.

On July 25th 2018, B8 spółka z ograniczoną odpowiedzialnością Baltic S.K.A. and Bank Gospodarstwa Krajowego concluded an annex to the senior note programme agreement and annexes to the terms and conditions of the notes issued by the company and acquired by BGK. On July 27th 2018, B8 Spółka z ograniczoną odpowiedzialnością Baltic S.K.A. issued notes with a total nominal value of USD 30m. The issue proceeds were used to redeem all notes acquired by Polski Fundusz Rozwoju S.A. As at September 30th 2018, the company had the right to issue additional notes for USD 32.7m under the agreement. All the issued notes are due at dates falling in the period from September 30th 2020 to June 30th 2022. As at September 30th 2018, in relation to the outstanding notes of B8 Spółka z ograniczoną odpowiedzialnością Baltic S.K.A. there were no defaults on the financial covenants changed by the annex and thus no grounds for BGK to exercise the early redemption option.

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

21. Provisions

Provisions for decommissioning and site restoration costs Other Provision for oil and gas extraction facilities Provisions for retired Total Total provisions refining and other units Note Poland Norway Lithuania January 1st 2018 (audited) 196.9 814.8 13.1 12.5 1,037.3 37.0 1,074.3 Recognised - - - - - 0.4 0.4 Remeasurement of estimated provision for contingent 11 - - - - - 18.2 18.2 payments Change in provisions attributable to approaching due date 13 3.1 25.4 0.7 - 29.2 0.1 29.3 of liability (discount unwinding effect) Interest on Oil and Gas Facility Decommissioning Fund 0.3 - - - 0.3 - 0.3 Exchange differences on translating foreign operations - 51.1 0.3 - 51.4 0.5 51.9 Used - (2.0) - - (2.0) (11.6) (13.6) Reversed - - - (0.3) (0.3) (3.3) (3.6) September 30th 2018 (unaudited) 200.3 889.3 14.1 12.2 1,115.9 41.3 1,157.2 including: non-current 200.3 886.6 14.1 12.1 1,113.1 1.5 1,114.6 current - 2.7 - 0.1 2.8 39.8 42.6 January 1st 2017 (audited) 186.5 958.6 14.0 15.2 1,174.3 82.8 1,257.1 Recognised - - - - - 6.9 6.9 Remeasurement of estimated provision for contingent - - - - - (0.6) (0.6) payments Change in provisions attributable to approaching due date 13 3.3 26.8 0.6 0.1 30.8 0.4 31.2 of liability (discount unwinding effect) Interest on Oil and Gas Facility Decommissioning Fund 0.3 - - - 0.3 - 0.3 Exchange differences on translating foreign operations - (54.0) (0.4) - (54.4) (2.1) (56.5) Used - (3.9) - - (3.9) (32.4) (36.3) Reversed - - - - - (15.4) (15.4) September 30th 2017 (unaudited) 190.1 927.5 14.2 15.3 1,147.1 39.6 1,186.7 including: non-current 190.1 917.9 14.2 13.9 1,136.1 5.2 1,141.3 current - 9.6 - 1.4 11.0 34.4 45.4

Provisions for decommissioning and site restoration costs:

Provision for oil and gas extraction facilities in Poland – a provision for future costs of decommissioning of the oil and gas extraction facilities in the B-3 and B-8 licence areas, and the Oil and Gas Extraction Facility Decommissioning Fund, set up to cover future costs of decommissioning of oil and gas extraction facilities in accordance with the Geological and Mining Law of February 4th 1994 and the Minister of Economy’s Regulation of June 24th 2002.

Provision for oil and gas extraction facilities in Norway − a provision for future costs of decommissioning of the oil extraction facilities in the YME field, and the oil and gas extraction facilities in the Heimdal and Sleipner fields.

Provision for oil and gas extraction facilities in Lithuania − a provision for future costs of decommissioning of the Lithuanian oil extraction facilities.

Provisions for retired refining and other units − a provision for site restoration and the cost of disassembly and decommissioning of the retired units at LOTOS Terminale S.A., a provision for estimated cost of disassembly of the subsea pipeline operated by a subsidiary Energobaltic Sp. z o.o. (a company of the LOTOS Petrobaltic Group), as well as for site restoration and clean-up.

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

22. Changes in the fair value determination method applied to financial instruments measured at fair value and in the classification of financial assets In the nine months ended September 30th 2018, the Group made no changes to the method of fair value measurement applied to financial instruments measured at fair value through profit or loss (for a description of the method, see Note 7.21 to the consolidated financial statements for 2017), and made no transfers of financial instruments between fair value hierarchy levels (see Note 23.1 to the consolidated financial statements for 2017). As at September 30th 2018 and December 31st 2017, the Group held derivative instruments classified as fair value hierarchy Level 2.

Sep 30 2018 Dec 31 2017 Fair value hierarchy (Level 2) (unaudited) (audited) Financial assets Commodity swap 36.2 34.7 Currency forward and spot contracts 3.4 13.1 Interest rate swap (IRS) 13.1 9.3 Currency swap 4.1 107.4 Total 56.8 164.5 Financial liabilities Commodity swap 4.6 3.8 Currency forward and spot contracts 7.4 9.5 Interest rate swap (IRS) 3.4 27.8 Currency swap 8.5 38.3 Total 23.9 79.4 As at September 30th 2018 and December 31st , there was no reclassification of financial instruments other than that required by the implementation of IFRS 9 (see Note 4.1). As at September 30th 2018, the Group recognised shares in other entities of PLN 9.8m, under assets measured at fair value through other comprehensive income. In accordance with IAS 39, as at December 31st 2017 those assets were disclosed as available for sale and measured at historical cost less impairment.

As at September 30th 2018 and December 31st 2017, the fair values of financial assets and liabilities did not materially differ from their carrying amounts.

23. Contingent liabilities and assets 23.1 Material court, arbitration or administrative proceedings, other risks to the Parent or its subsidiaries, and material settlements under court proceedings In the period between the end of the previous financial year, i.e. December 31st 2017, and the date of issue of these interim financial statements, there were no significant changes with respect to pending material court, arbitration, and administrative proceedings or with respect to other risks to the Company or its subsidiaries. For information on pending material proceedings, see Note 29.1 to the consolidated financial statements for 2017.

23.2 Other contingent liabilities In the period between the end of the previous financial year, i.e. December 31st 2017, and the date of issue of these interim financial statements, there were no changes in the Company’s or its subsidiaries’ other material contingent liabilities.

24. Related parties 24.1 Transactions with related entities in which the Group holds equity interests Equity-accounted joint ventures

In the three and nine months ended September 30th 2018, the Group made material transactions with LOTOS-Air BP Polska Sp. z o.o., with the total value of PLN 231.0m and PLN 486.3m, respectively (in the three and nine months ended September 30th 2017: PLN 135.5m and PLN 298.8m, respectively). As at September 30th 2018, the balance of outstanding receivables under those transactions was PLN 83.3m (December 31st 2017: PLN 34.5m). The transactions with LOTOS-Air BP Polska Sp. z o.o. involved mainly sale of aviation fuel.

In the three and nine months ended September 30th 2018, the Group made two transactions with UAB Minijos Nafta, with the total value of PLN 8.1m and PLN 19.9m, respectively. The transactions involved purchase of crude oil. As at September 30th 2018, the balance of outstanding payables under those transactions was PLN 7.2m. In the comparative period, the Group did not enter into any material purchase transactions with related parties.

For general information on joint ventures in which the Group holds interests, see Note 2.

24.2 Entity having control of the Group As at September 30th 2018 and December 31st 2017, the State Treasury held 53.19% of Grupa LOTOS S.A. shares. In the three and nine months ended September 30th 2018 and September 30th 2017, there were no transactions between the Company and the State Treasury.

24.2.1 Transactions with related entities of which the State Treasury has control or joint control or on which the State Treasury has significant influence In the three and nine months ended September 30th 2018 and September 30th 2017, the aggregate value of transactions executed by the Group with parties related to it through the State Treasury was material. The transactions were made on an arm’s length basis in the

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LOTOS GROUP Interim condensed consolidated financial statements for the three and nine months ended September 30th 2018 Notes to the financial statements (PLNm)

course of the Group’s day-to-day operations and involved mainly purchase and sale of fuels, purchase of crude oil and natural gas, and transport services.

3 months ended 9 months ended 3 months ended 9 months ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited) Sales 174.3 453.8 133.3 332.8 Purchases 486.8 1,380.5 410.2 1,208.2 Sep 30 2018 Dec 31 2017 (unaudited) (audited) Receivables 36.8 82.9 Liabilities 255.5 263.4

In addition, the Group had liabilities under credit facilities, loans, notes and finance leases towards banks and financial institutions of which the State Treasury has control or joint control or over which it exercises significant influence. These entities included PKO BP S.A., PEKAO S.A., Bank Gospodarstwa Krajowego, and Agencja Rozwoju Przemysłu S.A.

Sep 30 2018 Dec 31 2017 (unaudited) (audited) Bank borrowings 1,510.5 1,039.3 Non-bank borrowings 59.0 68.3 Notes 209.5 201.7 Finance lease liabilities 22.1 27.4 Total 1,801.1 1,336.7

24.3 Remuneration of members of the Company’s governing bodies and its key management staff

9 months ended 9 months ended Remuneration paid to members of the Company’s Management and Sep 30 2018 Sep 30 2017 Supervisory Boards (unaudited) (unaudited) Management Board Short-term employee benefits (salaries) 1.8 2.0 Management Board – subsidiaries (1) Short-term employee benefits (salaries) - 0.3 Supervisory Board Short-term employee benefits (salaries) 0.4 0.4 Total (2) 2.2 2.7

(1) Remuneration paid to members of the Company’s Management Board for serving on corporate bodies of direct and indirect subsidiaries. (2) The amount reflects changes in the composition of the Company’s Management and Supervisory Boards.

In the nine months ended September 30th 2018 and September 30th 2017, the Company did not enter into any significant transactions with any Management Board or Supervisory Board members, did not advance any loans, make any advance payments, issue any guarantees for or conclude any other agreements with any Management Board or Supervisory Board member, which could have a material bearing on these financial statements or would be advanced, made, issued or concluded other than on an arm’s length basis.

In the nine months ended September 30th 2018 and September 30th 2017, Grupa LOTOS S.A. did not become aware, based on representations submitted by members of the Company’s Management and Supervisory Boards, of any transactions concluded with the Company or another company of the LOTOS Group by the spouses, relatives, or relatives by affinity in the direct line up to the second degree, of the members of the Management and Supervisory Boards or persons related to them through guardianship or adoption or other persons with whom they have personal relationships.

9 months ended 9 months ended Remuneration paid to members of key management staff (other than Sep 30 2018 Sep 30 2017 members of the Grupa LOTOS Management Board) (unaudited) (unaudited) Short-term employee benefits (salaries), including: 29.0 32.9 - annual bonus paid 4.6 (1) 6.7 (2) - length-of-service award paid 0.4 0.4

(1) Remuneration paid in 2018 on account of annual bonus for 2017. (2) Remuneration paid in 2017 on account of annual bonus for 2016.

In the nine months ended September 30th, the Group did not provide any loans to members of its key management staff. In the comparative period, the Group did not advance any material loans to its key management staff.

24.4 Transactions with parties related to the Company through members of the Management Board and the Supervisory Board In the nine months ended September 30th 2018 and September 30th 2017, the Group entered into transactions with parties related to it through members of the Management and Supervisory Boards. The transactions were connected with the Group’s day-to-day operations and related mainly to the purchase of civil liability insurance policies and property insurance policies for PLN 9.9m (nine months ended September 30th 2017: PLN 25.7m). As at September 30th 2018, unsettled transactions with parties related to the Company through members of the Management or Supervisory Boards totalled PLN 4.1m (December 31st 2017: PLN 0.9m).

Moreover, as at September 30th 2018, the Group disclosed liabilities under a loan in the amount of PLN 4.5m.

All transactions with parties related to the Group through members of the Management Board and the Supervisory Board were executed on an arm’s length basis.

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II. QUARTERLY FINANCIAL INFORMATION OF THE PARENT FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30TH 2018

(This is a translation of a document originally issued in Polish) 26 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b GRUPA LOTOS S.A. Quarterly financial information for the three and nine months ended September 30th 2018 (PLNm)

SEPARATE STATEMENT OF COMPREHENSIVE INCOME 3 months ended 9 months ended 3 months ended 9 months ended Sep 30 2018 Sep 30 2018 Sep 30 2017 Sep 30 2017 (unaudited) (unaudited) (unaudited) (unaudited)

Revenue 7,450.2 19,775.7 5,411.2 14,822.9 Cost of sales (6,672.8) (17,734.0) (4,725.2) (13,482.4)

Gross profit 777.4 2,041.7 686.0 1,340.5

Distribution costs (183.5) (548.8) (180.3) (500.9) Administrative expenses (55.4) (160.3) (56.4) (160.6) Other income 1.1 10.6 0.9 15.2 Other expenses (1.5) (6.5) (1.5) (6.7)

Operating profit 538.1 1,336.7 448.7 687.5

Finance income 34.6 414.4 49.1 395.4 Finance costs (36.4) (83.6) (29.4) (90.5)

Profit before tax 536.3 1,667.5 468.4 992.4 Corporate income tax (101.9) (247.4) (87.2) (164.3) Net profit 434.4 1,420.1 381.2 828.1

Other comprehensive income/(loss)

Items that may be reclassified to profit or loss: Cash flow hedges 70.2 (73.9) 64.7 543.9 Corporate income tax relating to cash flow (13.4) 14.0 (12.3) (103.3) hedges

Other comprehensive income/(loss), net 56.8 (59.9) 52.4 440.6

Total comprehensive income/(loss) 491.2 1,360.2 433.6 1,268.7

Earnings per share (PLN)

Weighted average number of shares (million) 184.9 184.9 184.9 184.9 - basic 2.35 7.68 2.06 4.48 - diluted 2.35 7.68 2.06 4.48

(This is a translation of a document originally issued in Polish) 27 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b GRUPA LOTOS S.A. Quarterly financial information for the three and nine months ended September 30th 2018 (PLNm)

SEPARATE STATEMENT OF FINANCIAL POSITION

Sep 30 2018 Dec 31 2017 (unaudited) (audited)

ASSETS Non-current assets Property, plant and equipment 5,888.6 6,042.6 Intangible assets 94.9 99.9 Shares 2,344.5 2,288.5 Derivative financial instruments 17.5 0.7 Other non-current assets 168.6 208.7 Total non-current assets 8,514.1 8,640.4 Current assets Inventories 4,224.8 3,335.5 - including emergency stocks 3,014.3 2,116.9 Trade receivables 3,269.6 2,597.1 Derivative financial instruments 26.4 152.8 Other current assets 167.8 225.4 Cash and cash equivalents 984.7 828.1 Total current assets 8,673.3 7,138.9 Total assets 17,187.4 15,779.3

EQUITY AND LIABILITIES Equity Share capital 184.9 184.9 Share premium 2,228.3 2,228.3 Cash flow hedging reserve (285.1) (225.2) Retained earnings 7,939.5 6,704.3 Total equity 10,067.6 8,892.3 Non-current liabilities Bank borrowings 1,518.3 1,839.8 Derivative financial instruments 2.8 6.7 Deferred tax liabilities 263.1 227.2 Employee benefit obligations 62.9 58.6 Other liabilities and provisions 15.5 17.5 Total non-current liabilities 1,862.6 2,149.8 Current liabilities Bank borrowings 902.6 899.9 Derivative financial instruments 19.4 72.7 Trade payables 2,257.2 2,122.3 Current tax payables 166.4 22.6 Employee benefit obligations 42.0 51.9 Other liabilities and provisions 1,869.6 1,567.8 Total current liabilities 5,257.2 4,737.2 Total liabilities 7,119.8 6,887.0 Total equity and liabilities 17,187.4 15,779.3

(This is a translation of a document originally issued in Polish) 28 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b

GRUPA LOTOS S.A. Quarterly financial information for the three and nine months ended September 30th 2018 (PLNm)

SEPARATE STATEMENT OF CASH FLOWS (prepared using the indirect method)

9 months ended 9 months ended Sep 30 2018 Sep 30 2017 (unaudited) (unaudited)

Cash flows from operating activities Net profit 1,420.1 828.1 Adjustments: (1,012.9) 159.0 Income tax 247.4 164.4 Depreciation and amortisation 273.4 294.7 Foreign exchange (gains)/losses 78.0 0.1 Interest and dividends (311.3) (58.7) (Gain)/loss from investing activities 0.2 0.1 Settlement and valuation of derivative financial instruments (10.6) (184.3) (Increase) in trade receivables (672.5) (580.4) (Increase)/Decrease in other assets (14.6) 118.4 (Increase)/Decrease in inventories (890.2) 112.0 Increase/(Decrease) in trade payables 134.9 (44.4) Increase in other liabilities and provisions 158.0 339.8 (Decrease) in employee benefit obligations (5.6) (2.7) Income tax paid (53.3) (58.7) Net cash from operating activities 353.9 928.4

Cash flows from investing activities Dividends received 341.0 34.6 Interest received 8.3 7.7 Sale of property, plant and equipment and intangible assets 0.7 0.3 Decrease in loans advanced to LOTOS Petrobaltic S.A. 36.0 - Refund of additional contributions to LOTOS Paliwa Sp. z o.o.’s equity 121.3 - Purchase of property, plant and equipment and intangible assets (118.0) (309.1) Acquisition of shares in LOTOS Upstream Sp. z o.o. (56.0) - Loans advanced to LOTOS Upstream Sp. z o.o. - (2.5) Security deposit (margin) 53.2 18.0 Cash flows under cash pooling arrangement (0.1) 121.6 Settlement of derivative financial instruments 11.9 - Net cash from investing activities 398.3 (129.4)

Cash flows from financing activities Repayment of bank borrowings (385.6) (441.4) Interest paid (74.4) (85.4) Dividends paid (184.9) (184.9) Settlement of derivative financial instruments 46.0 34.8 Net cash from financing activities (598.9) (676.9)

Total net cash flow 153.3 122.1 Effect of exchange rate fluctuations on cash held 2.9 (1.8) Change in net cash 156.2 120.3 Cash at beginning of period 828.0 536.9 Cash at end of period 984.2 657.2

(This is a translation of a document originally issued in Polish) 29 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b GRUPA LOTOS S.A. Quarterly financial information for the three and nine months ended September 30th 2018 (PLNm)

SEPARATE STATEMENT OF CHANGES IN EQUITY

Cash flow Retained Share capital Share premium Total equity hedging reserve earnings

January 1 2018 (audited) 184.9 2,228.3 (225.2) 6,704.3 8,892.3 Net profit - - - 1,420.1 1,420.1 Other comprehensive income/(loss), - - (59.9) - (59.9) net

Total comprehensive income/(loss) - - (59.9) 1,420.1 1,360.2

Dividend - - - (184.9) (184.9)

September 30 2018 (unaudited) 184.9 2,228.3 (285.1) 7,939.5 10,067.6

January 1 2017 (audited) 184.9 2,228.3 (812.8) 5,469.2 7,069.6 Net profit - - - 828.1 828.1 Other comprehensive income/(loss), - - 440.6 - 440.6 net

Total comprehensive income/(loss) - - 440.6 828.1 1,268.7

Dividend - - - (184.9) (184.9)

September 30 2017 (unaudited) 184.9 2,228.3 (372.2) 6,112.4 8,153.4

(This is a translation of a document originally issued in Polish) 30 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b LOTOS GROUP FINANCIAL REPORT FOR THE THIRD QUARTER OF 2018

AUTHORISATION OF QUARTERLY FINANCIAL REPORT FOR ISSUE

This quarterly financial report was approved for issue by the Management Board on October 25th 2018.

Signatures of the Management Board members and the person responsible for keeping the accounting books of Grupa LOTOS S.A.

President of the Management Board

Vice President of the Management Board, Chief Investment and Innovation Officer

Vice President of the Management Board, Chief Refining and Marketing Officer

Vice President of the Management Board, Corporate Affairs

Vice President of the Management Board, Chief Financial Officer

Finance and Accounting Centre Director - Chief Accountant

(This is a translation of a document originally issued in Polish) WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis and supplementary information for the third quarter of 2018 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

ISIN Stock Exchange Thomson Reuters Bloomberg

PLLOTOS00025 LTS LTSP.WA LTS PW

Market environment ...... 3 Upstream segment ...... 6 Downstream segment ...... 14 Consolidated statement of comprehensive income...... 20 Consolidated statement of financial position...... 24 Consolidated statement of cash flows ...... 26 Supplementary information ...... 27

An excel file with the operating and financial data for Q3 2018 and the previous reporting periods is published in the Investor Relations section of our website at → inwestor.lotos.pl as → databook

2 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Market environment

• Marked growth of crude oil and natural gas prices (up 44.1% or USD 22.98/bbl1 and up 53.9% or USD +16.35/boe, respectively)2

• Strong year-on-year decline in heavy fuel oil crack spread (down 54.0%, or USD 2.44/bbl) and gasoline crack spread (down 12.5%, or USD 2.04/bbl), accompanied by an increase in crack spreads for diesel oil (up 7.6%, or USD 1.16/bbl), light fuel oil (up 11.7%, or USD 1.6/bbl), and aviation fuel (up 9.9%, or USD 1.45/bbl)

• 30.7% year-on-year growth of the average Brent/Urals spread in the quarter, from USD 1.01/bbl to USD 1.32/bbl

• Model refining margin: year-on-year decrease of 12.8%, from USD 8.57/bbl to USD 7.47/bbl, and 2.5% growth relative to Q2 2018

• Appreciation of the Polish złoty against the US dollar: 1.9% year on year (PLN 0.07) and 3.4% (PLN 0.12) quarter on quarter

Brent/Urals prices (USD/bbl), natural gas price (USD/boe) and USD/PLN exchange rate

Q3 2017 Q3 2018

260,0%

240,0%

220,0%

200,0%

180,0%

160,0%

140,0%

120,0%

100,0%

80,0% Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18

Brent Ural GazNatural ziemny Gas USD/PLN

Source: In-house analysis based on Thomson Reuters and National Bank of Poland data.

1Bbl – barrel of crude oil. 2Boe – barrel of oil equivalent.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Brent crude prices, Brent/Urals spread, gas prices and Grupa LOTOS’ model refining margin

USD/bbl Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

DATED Brent FOB prices 3 75.08 74.55 52.10 0.7% 44.1%

Brent/Urals spread 1.32 2.17 1.01 -39.2% 30.7%

UK NBP natural gas prices 4 46.67 40.70 30.32 14.7% 53.9%

Model refining margin 5 7.47 7.29 8.57 2.5% -12.8% Source: In-house analysis and Thomson Reuters.

Crack spreads 6

USD/bbl Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Motor gasoline 14.25 13.18 16.29 8.1% -12.5%

Naphtha -0.45 -0.84 0.83 - -

Diesel oil (10 ppm) 16.37 17.03 15.21 -3.9% 7.6%

Light fuel oil 15.24 15.22 13.64 0.1% 11.7%

Aviation fuel 16.10 17.35 14.65 -7.2% 9.9%

Heavy fuel oil -6.96 -9.23 -4.52 24.6% -54.0% Source: Thomson Reuters.

Exchange rates

USD/PLN Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

PLN/USD exchange rate at end of period 3.68 3.74 3.65 -1.6% 0.8%

Average PLN/USD exchange rate 3.70 3.58 3.63 3.4% 1.9% Source: In-house analysis based on National Bank of Poland data.

3 source: Thomson Reuters. 4 To ensure comparability, the UK NBP natural gas prices were converted from USD/MWh to USD/boe using the conversion factor of 1.6282 MWh/boe. 5 In line with the methodology applied by the Company, the model margin was computed based on Thomson Reuters data, which reflect long-term trends in prices used by the Company in its trading activities. In a shorter term, the prices used to compute the model margin may differ from the actual trading prices. 6 Product crack spread is calculated as the difference between the price per barrel of a given product (price per tonne computed using the appropriate density factor) and the price of Urals crude (the Brent crude price adjusted for the Brent/Urals spread). 4

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Presented below are key factors contributing to the LOTOS Group's performance in Q3 2018.

• Feedstock and products

o Downstream segment A ca.12.8% year-on-year decline in the model refining margin, with the refinery's capacity utilisation at the maximum rate, translated into the Downstream segment’s Q3 2018 adjusted LIFO-based EBITDA of approximately PLN 687.7m (down 8.4% year on year).

o Upstream segment Gr owing oil prices (up 44.1% year on year) and the UK National Balancing Point natural gas prices (up 53.9%) supported the Upstream segment’s performance and alleviated the effect of a year-on-year decline in the hydrocarbon sales volumes (down 2.1%), resulting in the segment’s adjusted EBITDA of PLN 214.6m (up 27.7% year on year).

• Exchange rates

o An increase in the average USD/PLN exchange rate in the quarter (up 1.9% year on year) had a positive impact on crack spreads and thus on the Downstream segment’s performance.

5 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Upstream segment

• Hydrocarbon production at 17,600 boe/d7 (down 18.6%% quarter on quarter and 16.2% year on year) • A 26.4% decline in the daily output from the Norwegian fields quarter on quarter, caused by the scheduled maintenance shutdown in the Sleipner area during which the necessary modifications for the future tie-in of the Utgard field were made • Upstream segment’s adjusted EBITDA at PLN 214.6m, up 27.7% year on year • Upstream segment's adjusted EBIT at PLN 164.0m, up 66% year on year

Crude oil and natural gas reserves, production and sales

Crude oil and natural gas reserves as at (mboe)8 Sep 30 2018 Jun 30 2018 Sep 30 2017

Norway 35.2 36.3 22.6

Poland 50.0 50.4 45.7

Lithuania 3.4 3.5 3.7

Total 88.6 90.2 72.0

Production (boe/d) Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Norway 12,179 16,541 15,278 -26.4% -20.3%

Poland 4,698 4,345 4,836 8.1% -2.9% Lithuania 771 798 952 -3.4% -19.0% Total 17,647 21,684 21,065 -18.6% -16.2%

Production (boe) Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Norway 1,120,430 1,505,269 1,405,544 -25.6% -20.3% Poland 432,239 395,405 444,924 9.3% -2.9%

Lithuania 70,898 72,609 87,548 -2.4% -19.0%

Total 1,623,567 1,973,283 1,938,016 -17.7% -16.2%

Oil and gas sales (boe) Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Norway 1,116,210 1,472,8739 1,355,512 -24.2% -17.7%

Poland 478,874 395,392 326,911 21.1% 46.5%

Lithuania 101,942 95,757 51,085 6.5% 99.6%

Total 1,697,026 1,964,022 1,733,508 -13.6% -2.1%

7 Daily production = production in a period / number of calendar days. 8 2P – proved and probable reserves (SPE-PRMS classification). 9 The data differs from that published in the half-year report due to change of the data presentation methodology. 6 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Organisation of the Upstream segment

The LOTOS Group’s Upstream segment is organised as follows:

The Upstream segment’s business structure as at September 30th 2018

GRUPA LOTOS S.A.

LOTOS Upstream LOTOS Petrobaltic S.A. B3 field, exploration licences

LOTOS LOTOS LOTOS Baltic Gas SPV B8 Technical resources Norge Geonafta UK (ships, platforms)

LOTOS Upstream (LUPS), a holding company, carries out the segment’s development plans with the support of the following subsidiaries: LOTOS E&P Norge AS (operations on the Norwegian Continental Shelf), AB LOTOS Geonafta and its subsidiaries (onshore operations in Lithuania), Baltic Gas Sp. z o.o., Baltic GAS i wspólnicy Sp. z o.o. Sp.k. (B4 and B6 gas field development project), and LOTOS Upstream UK Ltd (vehicle for potential development in the UK). LUPS’s key roles include business development, economic analyses of new and ongoing projects, potential acquisitions/divestments, asset portfolio management, corporate supervision, management of the B4/B6 project, technical supervision and controlling, provision of guarantees and sureties, and arrangement of external financing. LOTOS Petrobaltic and its subsidiaries focus on the upstream operations and services in the Baltic Sea, including production from the B3 field, development of the B8 field to start full production, and execution of exploration projects in the Baltic Sea and onshore licence areas in Poland. Concurrently, the segment’s current business structure supports development of engineering, execution and design capabilities for the offshore sector at LOTOS Petrobaltic, which may ultimately be used in providing services outside Grupa LOTOS S.A.

7 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Exploration and production activities in Poland

Licences held by the LOTOS Group companies as at September 30th 2018

Source: In-house analysis.

In Q3 2018, LOTOS Petrobaltic S.A. continued to produce crude oil from the B3 field in the Baltic Sea.

B8 Project

The SPV B8 Sp. z o.o. Baltic S.K.A. (“SPV B8”) carried out initial production operations in the B8 oil field in the Baltic Sea and continued work on the development of the B8 oil field, including the conversion of the Petrobaltic oil platform into a production hub in the field.

In Q3 2018, efforts were continued to interconnect four technological modules, namely the crude oil separation system (M3), gas compression and export system (M1), water injection system (M2), and power system (M4), with a turbogenerator using separated gas as the basic fuel for the platform. Considerable progress was also achieved in electrical and automation works, including laying of more than 175 km of cables. The LQ (living quarter) module was skidded, and the flare system was installed as scheduled. Work was continued at the Gdańsk shipyard to upgrade and convert the Petrobaltic oil platform into a production hub for the offshore oil extraction facility on the B8 field, including the installation of ventilation, air-conditioning, electricity and automation systems. As at the end of Q3 2018, the platform conversion project reached stage 2, having achieved mechanical completion and readiness to commence commissioning. Technical facilities in the B8 field are being adapted for operation with the production hub. The offshore gas pipeline is being secured with concrete mattresses, which

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results is the final stage of its construction. Moreover, the financing institutions have approved the new structure of the project financing. As at the end of September 2018, the percentage of completion of the B8 field development project, including the platform conversion and pipeline construction, was 87.3%. The project is scheduled to be ready for operation (RFO) in Q2 2019, with full-scale production from the B8 field expected to commence in Q3 2019. With regard to exploration activities, the following developments took place: • In the Młynary onshore licence area, 2D seismic surveys were completed, and the acquired data was processed; • On July 18th 2018, the Ministry of Environment issued decisions amending the Gotland, Łeba and Rozewie offshore licences, in particular the terms and conditions, form, and amount of the security provided to cover potential claims which may arise in connection with exploration activities conducted under the licences.

Baltic Gas Project LOTOS Upstream, in partnership with CalEnergy Resources Poland Sp. z o.o., has been carrying out a project to develop the B4/B6 gas fields. The development operations are being run by Baltic Gas LLP, an SPV in which LOTOS holds a 51% ownership interest. The recoverable reserves of the B4/B6 fields are estimated at 4.8 bcm (100% interest). So far, the following project milestones have been reached:

• The field development concept was selected; • 3D seismic surveys were carried out; and • The Front End Engineering & Design (FEED) was completed. Currently, the project is pending a final investment decision, which is expected to be taken after the risks associated with connecting the project to the onshore gas transmission network have been mitigated, i.e. a 30km long pipeline between Władysławowo and Kosakowo has been designed and constructed. Accordingly, preparatory stage 3 has been launched, which comprises designing the onshore pipeline, taking relevant administrative proceedings, obtaining environmental permits, resolving land and other property ownership matters, securing financing, and carrying out critical path works. According to the current project schedule, the final investment decision is to be made in the second half of 2019.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Exploration and production activities in Norway

Licences held by LOTOS Exploration & Production Norge AS at September 30th 2018

Source: In-house analysis. 10 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

In Q3 2018, LOTOS Norge, operating in a consortium, produced natural gas and condensate from the Atla, Vale, Skirne, and Heimdal fields (Heimdal assets) and from the Sleipner Ost, Sleipner Vest, Loke and Gungne fields (Sleipner assets). The average output of the Norwegian assets in Q3 2018 was 12.2 thousand boe/d, down 31% q/q and 20% y/y. The lower production volumes in Norway were attributable to a scheduled maintenance shutdown in the Sleipner area. Maintenance work was commenced on schedule, i.e. on August 31st 2018, and was completed on September 21st 2018 in the Sleipner East, Loke, and Gungne fields and September 30th 2018 in the Sleipner Vest field. Apart from the scheduled maintenance and upgrades, necessary modifications were also made during the shutdown on the Sleipner platform to adapt it for future treatment and separation of gas and condensate from the Utgard field. Output from the Norwegian assets was also adversely affected by a production stoppage in the Vale field, Heimdal production area, which continued from April 9th 2018. The production relaunching date for the Vale field remains highly uncertain, and so does production stability following the relaunch. The recurring production stoppages on the Vale field are caused by problems with the processing of the reservoir fluid on the Heimdal platform. In Q3 2018, work was continued in connection with the projects to develop the Utgard and YME fields. Utgard project Development of the Utgard field is nearing completion. The field’s operator is Equinior (formerly Statoil), and the development is carried out under a fast-track model, leveraging synergies with the existing infrastructure of the Sleipner hub. With the subsea field facilities having been completed in Q2 2018, necessary modifications were made in Q3 2018 on the Sleipner platform to adapt it for future treatment and separation of gas and condensate from the Utgard field. Concurrently, preparations were made to spud production wells in the field. The project is being implemented on time and on budget. Key Utgard project parameters (LOTOS Norge's interest): • LOTOS Norge’s interest 17.36% • 2P reserves 8.1 mboe (condensate – 55%, gas – 45%) • Production to be launched in Q1 2020 • Expected average production output 4,100 boe/d (for 5-year period from the production launch). Yme project The Yme field is currently being developed. Its operator is Repsol, and the development activities are being carried out in accordance with the approved new development plan, using a leased platform, Maersk Inspirer. As part of the project, a reinforcing structure was assembled for the caisson, subsea work was carried out to prepare the site for installing the caisson in place, and an oil loading system was prepared. At the same time, the Maersk Inspirer platform was upgraded to adapt it for its future use as the Yme field production hub. During the coming winter, a wellhead will be installed on the caisson. Then, the caisson reinforcing structure will be put in place. In view of the progress made on the project, the field is likely to be developed on schedule, with production expected to be launched in mid-2020. Key Yme project parameters (LOTOS Norge's interest): • LOTOS Norge’s interest 20% • 2P reserves 12.9 mboe (100% crude) • Production to be launched in Q2 2020 • Expected average production output 5,000 boe/d (for 5-year period from the production launch).

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Exploration and production operations in Lithuania

Licences held by the AB LOTOS Geonafta Group as at September 30th 2018

Licences held by the AB LOTOS Geonafta Group: 1 – Girkaliai (100% AB LOTOS Geonafta) 2 – Genciai (UAB Genciu Nafta, 100% AB LOTOS Geonafta) 3 – Kretinga West (100% AB LOTOS Geonafta) 4 – Kretinga East (100% AB LOTOS Geonafta) 5 – Zygai (100% AB LOTOS Geonafta) 6 – Nausodis (100% AB LOTOS Geonafta) 7 – Plunge (100% AB LOTOS Geonafta) 8 – Klaipėda (UAB Manifoldas, 100% AB LOTOS Geonafta) 9 – Gargždai (UAB Minijos Nafta, 50% AB LOTOS Geonafta, 25% Odin Energi A/S, 25% Tethys Oil AB indirect interest 10 – Plateliai (UAB Troba, 12,88% AB LOTOS Geonafta, 87,12% Lithuanian private interest) All licences valid with no time limit.

Source: In-house analysis

In Q3 2018, companies of the AB LOTOS Geonafta Group of Lithuania focused on optimising production from the existing onshore oilfields: Girkaliai, Kretinga, Nausodis and Genciu, Vezaiciai, Liziai, and Ablinga.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Upstream − key financial data

PLNm Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Revenue 374.5 368.8 256.0 1.5% 46.3%

EBIT 146.0 176.4 98.8 -17.2% 47.8%

Depreciation and amortisation 50.6 60.3 69.3 -16.1% -27.0%

EBITDA 196.6 236.7 168.1 -16.9% 17.0%

Adjusted EBIT 10 164.0 176.4 98.8 -7.0% 66.0%

Adjusted EBITDA 214.6 236.7 168.1 -9.3% 27.7%

The quarter-on-quarter growth in revenue of the Upstream segment in Q3 2018 was driven primarily by higher prices of Dated Brent crude (up 44.1%) and natural gas (up 53.9%) as well as higher average USD/PLN exchange rate in the quarter (up 1.9%), with a 2.1% decline in sales volumes.

The slight quarter-on-quarter increase in revenue was mainly attributable to a 14.7% rise in gas prices, with a 13.6% decline in total volumes of hydrocarbons sold.

The segment’s lower depreciation and amortisation (y/y and q/q) was the effect of lower production and an increase in 2P hydrocarbon reserves in the Norwegian licence areas.

The year-on-year rise in the Upstream segment’s adjusted EBITDA in Q3 2018 resulted mainly from higher prices of crude oil and gas as well as appreciation of the US dollar against the złoty.

The quarter-on-quarter decline in the segment's adjusted EBITDA was caused by lower production and sales of hydrocarbons at LOTOS Norge, resulting from the scheduled maintenance shutdown in the Sleipner area and the production stoppage on the Heimdal platform.

10 Net of non-recurring items: in Q3 2018 – remeasurement of a provision for contingent payments recognised in connection with the Sleipner assets acquisition agreement: approximately PLN 18m.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Downstream segment

• Maximum capacity utilisation of the Grupa LOTOS S.A. refinery • Decrease in the Downstream segment’s adjusted LIFO-based EBITDA to PLN 687.7m (down 8.4% year on year), owing mainly to a drop in refining margin in Q3 2018

Crude slate

'000 tonnes Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Crude oil processed by the Gdańsk refinery 2,790.4 2,638.3 2,784.6 5.8% 0.2% including:

Urals crude 2,245.8 1,754.0 2,401.8 28.0% -6.5%

Rozewie crude 38.8 49.2 55.5 -21.1% -30.1%

Lithuanian crude 12.4 11.0 12.8 12.7% -3.1%

Lubiatów crude 77.4 73.1 76.0 5.9% 1.8%

Other 416.0 751.0 238.5 -44.6% 74.4%

In Q3 2018, the refinery's capacity utilisation rate was 105.4%. The refining operations were stable, with throughput at 2,790.4 thousand tonnes of crude oil.

EFRA (Effective Refining), Grupa LOTOS’ key investment project, is a continuation of a wider effort to upgrade the LOTOS refinery and supplements the deep crude oil processing configuration achieved under the 10+ Programme.

In Q3 2018, construction, assembly and start-up activities were continued on individual units, including installations, auxiliaries and general infrastructure. Commissioning work was under way on two of the three main EFRA Project units, i.e. the hydrogen generation unit (HGU) and vacuum distillation unit for residue (hydrowax) from the MHC unit (HVDU). The HVDU unit, following completion of a warranty test run, was placed in service and operates under the load required by the refinery’s day-to-day needs. The following facilities were declared ready for testing and trials: • HGU unit, • Tanks for DCU’s intermediate products, • New inter-unit connections. The following facilities were placed in service: • HVDU unit, • SRU II units (the ‘new’ Claus facilities; the units were adapted to operate using oxygen-enriched air), • SWS II, ARU II, and LPG Washing units, • Upgraded diesel oil hydrodesulfurization (HDS) unit, • Natural gas pipeline (underground and overground), • New condensate station (No. 7), • Upgraded power substation (P2/4). As at September 30th 2018, the progress of design, procurement and construction/assembly work under the EFRA Project was 96.3%.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

As the risk of failure to meet the Ready for Start Up deadline for the coking unit has actually materialised (→ see Current Report No. 21/2018 of the Grupa LOTOS S.A. Management Board of July 13th 2018), negotiations are being held with the general contractor of the DCU/CNHT unit (KT - Kinetics Technology S.p.A) to agree on a realistic work schedule.

Refining products 11

Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017 thousand tonnes 3,106.1 2,944.6 2,963.2 5.5% 4.8%

Gasolines 412.1 400.8 413.0 2.8% -0.2%

Naphtha 119.5 129.8 120.8 -7.9% -1.1%

Diesel oils 1,488.3 1,361.5 1,359.5 9.3% 9.5%

Light fuel oils 42.2 32.5 73.7 29.8% -42.7%

Jet fuel 150.3 127.6 133.0 17.8% 13.0%

Heavy products12 547.1 567.8 525.4 -3.6% 4.1%

Other13 346.6 324.6 337.8 6.8% 2.6%

Sales structure in the Downstream segment

Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017 thousand tonnes 3,026.7 2,890.4 2,960.2 4.7% 2.2%

Gasolines 430.8 416.5 420.7 3.4% 2.4%

Naphtha 119.5 129.8 120.8 -7.9% -1.1%

Diesel oils 1,514.2 1,386.6 1,465.4 9.2% 3.3%

Light fuel oils 42.9 32.1 66.7 33.6% -35.7%

Jet fuel 144.8 139.7 133.2 3.7% 8.7%

Heavy products14 544.5 561.4 531.0 -3.0% 2.5%

Other petroleum products 230.0 224.3 222.4 2.5% 3.4%

11 The difference between the volume of crude oil processed and output of products stems from the fact that, apart from crude oil, the processing units and finished product blenders receive biocomponent streams, enhancing additives and middle distillates purchased from third-party suppliers. 12 Heavy fuel oil and bitumen components 13 Other products include fuel and industrial gases, sulfur, base oils, xylene fraction, LPG, bunker fuel, extracts, refinates, and slack wax. 14 Heavy fuel oil and bitumen components 15 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Petroleum products market in Poland and LOTOS Group's sales in 2018

− information for third quarter 2018 year 15

After the first nine months of 2018, consumption of liquid fuels (diesel oil, gasolines and light fuel oil) in Poland grew 3.4% year on year, driven by an increase in diesel oil consumption (up 3.5%) and gasoline consumption (up 5.1%), offset by a decline in light fuel oil consumption (down 12.5%).

Motor gasoline

In the first nine months of 2018, gasoline consumption rose by 5.1% year on year. The LOTOS Group’s total sales of gasoline grew 2.4% (y/y) in Q3 2018, mainly on higher export sales and production optimisation measures undertaken to maximise the refining margin.

In Q3 2018, the average global crack spread for gasoline fell by USD 2.05/bbl year on year.

Motor gasoline – average monthly crack margin, USD/bbl (July 2017–September 2018)

Q3 2017 Q3 2018

19,00 18.25 17.27 17,00 16.18 14.85 14.46 15,00 13.89 13.07 13.31 12.60 13,00 12.21 11,56 11.87 10.55 11,00 10.26

9,00 8.29

7,00 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18

Source: In-house analysis based on Thomson Reuters data.

Diesel oil

2018 saw a continued growth in demand for diesel oil. After the first nine months of 2018, diesel oil consumption grew by 3.5% year on year. Aware of the growing demand for diesel oil in Poland, the LOTOS Group decided not to enter into futures and forward contracts for exports by road. As a result, exports declined while domestic sales grew by 3.8%.

In Q3 2018, the average global crack spread for diesel oil went up by USD 1.15/bbl year on year.

Data after the first five months of 201815 16 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Diesel oil – average monthly crack margin, USD/bbl (July 2017–September 2018)

Q3 2017 Q3 2018

19,00 17.80 18,00 17.55 17.07 17.17 16.94 16.54 17,00 15.98 16.07 16,00 15.39 15.04 15.20 15,00 14.21 14.19 13.68 13.85 14,00

13,00

12,00 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Source: In-house analysis based on Thomson Reuters data.

Heavy fuel oil

Sales of heavy fuel oil by the LOTOS Group in Q3 2018 declined in comparison with Q3 2017. In Q3 2018, the average negative heavy fuel oil crack spread on global markets was USD -6.97/bbl, having deteriorated by USD 2.45/bbl year on year.

Heavy fuel oil – average monthly crack margin, USD/bbl (July 2017–September 2018)

0,00 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 -2,00-3,31

-4,00 -5.01 -5.22 -4.97 -6.07 -5.89 -6,00 -7.30 -7.04 -8.55 -8,00 -8.72 -9.89 -9.44 -10.34 -10,00 -11.05 -10.95

-12,00

Q3 2017 Q3 2018

Source: In-house analysis based on Thomson Reuters data.

Light fuel oil

After the first nine months of 2018, consumption of light fuel oil fell by 12.5% and in Q3 (July–August) by 18.3%, mainly due to very high temperatures.In Q3 2018, the LOTOS Group reduced its domestic sales of light fuel oil by 35.6% year on year. In the same quarter, the average global crack spread for light fuel oil rose by USD 1.6/bbl year on year.

17 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Light fuel oil – average monthly crack margin, USD/bbl (July 2017–September 2018)

Q3 2017 Q3 2018

17,00 16,45 15,70 15,92 16,00 15,11 15,19 14,97 14,60 14,70 15,00 14,13 14,20 13,60 14,00 12,91 13,0012,33 12,36 11,60 12,00 11,00 10,00 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18

Source: In-house analysis based on Thomson Reuters data.

Downstream − key financial data

PLNm Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Revenue 8,136.6 7,305.0 6,098.0 11.4% 33.4%

EBIT 735.1 719.2 650.4 2.2% 13.0%

Depreciation and amortisation 124.1 123.8 132.9 0.2% -6.6%

EBITDA 859.2 843.0 783.3 1.9% 9.7%

LIFO-based EBIT 561.2 401.4 662.5 39.8% -15.3%

LIFO-based EBITDA 685.3 525.2 795.4 30.5% -13.8%

Adjusted LIFO-based EBITDA16 687.7 581.7 750.4 18.2% -8.4%

The Downstream segment’s revenue was up 33.4% year on year as a result of higher average net selling prices and an 2.2% rise in sales volumes. In Q3 2018, the segment’s average net selling price was PLN 2,688 per tonne, having increased 30.5% year on year, chiefly on higher prices of petroleum products on global markets and higher average USD/PLN exchange rate in the quarter. The 11.4% quarter-on-quarter revenue growth in the Downstream segment reported in Q3 2018 was mainly led by the segment’s improved sales volume (up 4.7%) and a rise in the average USD/PLN exchange rate in the quarter. In Q3 2018, adjusted LIFO-based EBITDA of the Downstream segment came in at PLN 687.8m, up 18.2% quarter on quarter and down 8.4% year on year. The adjusted quarter-on-quarter growth of LIFO-based EBITDA was driven mainly by: • Higher model refining margin, • Higher sales volumes,

16 EBITDA including the LIFO effect of inventory measurement and excluding theoretical write-downs on LIFO-measured inventories, net of foreign exchange differences on operating activities; additionally, net of the cost of the Spring 2017 maintenance shutdown in Q3 2017. 18 WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

• Increase in the average USD/PLN exchange rate for the quarter, affecting the refining and sales margins. The year-on-year decrease in adjusted LIFO-based EBITDA was mainly an effect of a 12.8% reduction in model refining margin.

Number of service stations in the LOTOS network as at September 30th 2018

Sep 30 Jun 30 Sep 30 Q3 2018/Q2 2018 Q3 2018/Q3 2017 2018 2018 2017 489 485 485 4 4

CODO 306 304 302 2 4

including: LOTOS OPTIMA 121 121 121 0 0

DOFO 183 181 183 2 0

including: LOTOS OPTIMA 78 78 83 0 -5

As at the end of September 2018, the LOTOS Group operated a network of 489 service stations.

Polish retail market as at September 30th 2018

AS 24; 29 Independent service- stations; 3 653 IDS; 14 Total; 31 AMIC (d.Łukoil); 115 Hypermarket service stations; 190

Circle K (d. STATOIL); 348

SHELL; 420

LOTOS 488

Orlen; 1 774 BP; 542

Source: Polish Organisation of Oil Industry and Trade (POPiHN).

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Retail − key financial data

PLNm Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Sales volume (’000 tonnes) 333.6 317.6 320.5 5.0% 4.1%

Revenue 1,839.0 1,706.2 1,515.1 7.8% 21.4%

EBIT 34.9 33.9 43.1 2.9% -19.0%

Depreciation and amortisation 16.8 17.1 18.2 -1.8% -7.7%

EBITDA 51.7 51.0 61.3 1.4% -15.7%

EBIT posted in Retail for Q3 2018 reached PLN 34.9m, on a par with that reported in the previous quarter.

The drop in EBITDA (down 15.7% year on year) was attributable to the lower unit margin on sales of fuels and higher costs of services at service stations.

Consolidated statement of comprehensive income

Key financial results of the LOTOS Group

PLNm Q3 2018 Q2 2018 Q3 2017 Q3 2018/Q2 2018 Q3 2018/Q3 2017

Revenue 8,344.0 7,531.0 6,262.5 10.8% 33.2%

EBIT 866.8 897.9 756.5 -3.5% 14.6%

Depreciation and amortisation 174.7 184.1 202.1 -5.1% -13.6%

EBITDA 1,041.5 1,082.0 958.6 -3.7% 8.6%

LIFO effect17 -173.9 -317.8 12.1 - -

LIFO-based EBIT 692.9 580.1 768.6 19.4% -9.8%

Adjusted LIFO-based EBIT18 713.3 636.6 725.0 12.0% -1.6%

Adjusted LIFO-based EBITDA18 888.0 820.7 925.7 8.2% -4.1%

In line with its inventory measurement policies, the LOTOS Group uses the weighted average method to measure changes in inventories. This method defers the impact of changes in crude oil prices on the prices of finished goods.

17 LIFO effect = LIFO-based EBIT (estimated with the LIFO, or Last In First Out, method) - EBIT 18 EBITDA including the LIFO effect of inventory measurement and excluding theoretical write-downs on LIFO-measured inventories (reversal of impairment losses in Q2 2018: PLN 1.3m, in Q3 2017: PLN 42.5m), net of exchange differences on operating activities and, additionally for Q3 2018 – remeasurement of a provision for contingent payments under the Sleipner assets acquisition agreement of approximately PLN 18m, and for Q3 2017 – costs of the Spring 2017 maintenance shutdown.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Thus, an increase in crude oil prices has a positive effect on financial performance, while a decrease adversely affects the performance.

Operating results computed using this inventory measurement method are presented in the EBITDA and EBIT lines of the table. The table also presents estimated inventory decreases measured using the LIFO method, as well as the LIFO effect, LIFO-based EBIT, adjusted LIFO-based EBIT, and adjusted LIFO-based EBITDA.

In Q3 2018, the LOTOS Group posted EBIT of PLN 866.8m, being the combined result of the Downstream segment’s operating profit of PLN 735.1m, the Upstream segment’s operating profit of PLN 146.0m, and PLN - 14.3m in consolidation adjustments (mainly the realised margin on sales of Rozewie and Lithuanian crudes adjusted for the margin on crude stocks held by the Group). LIFO-based EBITDA (excluding theoretical LIFO-based write-downs), net of non-recurring items and exchange differences on operating activities (adjusted LIFO-based EBITDA) was PLN 888.0m.

In Q3 2018, the LOTOS Group reported net finance costs of PLN -17.2m, with the main contributors being a negative net balance of interest on debt, interest income and commissions of PLN -39.0m, foreign exchange losses of PLN -5.6m, and a PLN 26.6m gain on measurement and settlement of hedging transactions.

In Q3 2018, the effect of measurement and settlement of market risk hedging transactions at the LOTOS Group included mainly a PLN 13.4m net gain on settlement and measurement of transactions hedging currency risk, a PLN 7.6m net gain on settlement and measurement of transactions hedging the risk of changes in prices of petroleum products and options, a PLN 4.1m net gain on settlement and measurement of transactions hedging the risk of changes in prices of CO2 emission allowances, and a PLN 1.5m net gain on settlement and measurement of interest rate swaps hedging interest rate risk.

Transactions hedging the risk related to petroleum product prices as at September 30th 2018

Purchase Sale

Heavy fuel oil Light fuel oil

Period Product/Feedstock 3.5 PCT Barges FOB Rotterdam Gasoil .1 Cargoes CIF NWE / ARA

Q4 2018 Volume (mt) 33,782 -3,121

Price range (USD/mt) 217.5 – 437.33 412 – 691.68

Q2 2019 Volume (mt) 4,764 -440

Price range (USD/mt) 287 – 287 488.25 – 488.25

Q3 2019 Volume (mt) 15,196 -1,405

Price range (USD/mt) 265.5 – 380.74 541 – 666.5

Q4 2019 Volume (mt) 2,705 -250

Price range (USD/mt) 265,5 – 361 541 – 643.25

Q2 2020 Volume (mt) 16,158 -1,494

Price range (USD/mt) 253.3 – 287.25 567-644

Q3 2020 Volume (mt) 28,181 -2,604

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Price range (USD/mt) 234 – 326.5 548.35 – 660.75

Volume (mt) 11,178 -1,033 Q4 2020 Price range (USD/mt) 234 – 287.25 548.35 – 644

Transactions hedging the currency risk as at September 30th 2018

Currency pair Instrument Volume Currency Exchange rate range EUR/USD exchange Forward 197,657,752 EUR 1.166 - 1.2187 rates EUR/PLN exchange Forward 43,400,000 EUR 4.2717 - 4.3079 rates USD/PLN exchange Forward -263,242,425 USD 3.5368 - 3.72 rates

Transactions hedging the interest rate risk as at September 30th 2018

Notional Interest rate Reference Instrument Start date End date Currency amount range rate

from Jan 16 2018 from Oct 15 2018 1.145% – 3M LIBOR – IRS 499,000,019 USD 2.476% 6M LIBOR to Sep 21 2021 to Dec 21 2021

Transactions hedging the risk related to prices of CO2 emission allowances as at September 30th 2018

2018 2019 2020

Volume Price range Volume Price range Volume Price range (mt) (EUR/mt) (mt) (EUR/mt) (mt) (EUR/mt)

EUAs Futures 701,000 4.45 – 7.7 747,000 7.64 – 19.85 -10,000 7.19

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Structure of the LOTOS Group's consolidated results in Q3 2018 (PLNm)

In Q3 2018, the LOTOS Group posted a consolidated net profit of PLN 631.6m.

EBIT, profit before tax and net profit/(loss) of the LOTOS Group

PLNm Q3 2018 Q2 2018 Q3 2017

EBIT 866.8 897.9 756.5

Profit/(loss) before tax 852.0 754.0 819.0

Net profit/(loss) 631.6 534.9 618.8

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Consolidated statement of financial position

Consolidated statement of financial position – assets Sep 30 Dec 31 Change % 2018 2017 PLNm 22,777.8 21,171.2 1,606.6 7.6%

Non-current assets 12,772.9 12,462.1 310.8 2.5%

Property, plant and equipment of the Downstream segment 8,745.8 8,761.5 -15.7 -0.2%

Intangible assets of the Downstream segment 159.6 163.2 -3.6 -2.2%

Property, plant and equipment of the Upstream segment 2,618.6 2,404.2 214.4 8.9%

Intangible assets of the Upstream segment 329.0 304.8 24.2 7.9%

Equity-accounted joint ventures 107.6 106.5 1.1 1.0%

Deferred tax assets 440.7 415.4 25.3 6.1%

Derivative financial instruments 28.1 2.7 25.4 940.7%

Other non-current assets 343.5 303.8 39.7 13.1%

Current assets 10,004.9 8,709.1 1,295.8 14.9%

Inventories 4,555.3 3,559.6 995.7 28.0%

Trade receivables 2,975.2 2,677.0 298.2 11.1%

Current tax assets 1.5 1.3 0.2 15.4%

Derivative financial instruments 28.7 161.8 -133.1 -82.3%

Other current assets 325.7 388.7 -63.0 -16.2%

Cash and cash equivalents 2,118.5 1,920.7 197.8 10.3%

As at September 30th 2018, the LOTOS Group carried total assets of PLN 22,777.8m (up PLN 1,606.6m on December 31st 2017).

Key changes in assets:

• PLN 995.7m increase in inventories (mainly of crude oil and petroleum products), attributable mainly to higher prices as at the end of Q3 2018 vs the end of 2017, • PLN 214.4m increase in the Upstream segment’s property, plant and equipment, • PLN 298.2m increase in trade receivables, mainly on higher prices of petroleum products as at the end of Q3 2018 vs the end of 2017, • PLN 197.8m increase in cash and cash equivalents, • PLN 107.7m decrease in positive fair value of financial derivatives.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Consolidated statement of financial position – sources of funding

Sep 30 Dec 31 Change % 2018 2017 PLNm 22,777.8 21,171.2 1,606.6 7.6%

Equity 11,955.2 10,712.5 1,242.7 11.6%

Share capital 184.9 184.9 0.0 0.0%

Share premium 2,228.3 2,228.3 0.0 0.0%

Cash flow hedging reserve -285.1 -225.2 -59.9 -26.6%

Retained earnings 9,726.0 8,432.2 1,293.8 15.3%

Translation reserve 101.0 92.2 8.8 9.5%

Non-controlling interests 0.1 0.1 0.0 0.0%

Non-current liabilities 4,486.8 4,264.4 222.4 5.2%

Borrowings, other debt instruments and finance lease liabilities 2,840.1 2,738.3 101.8 3.7%

Derivative financial instruments 2.8 6.7 -3.9 -58.2%

Deferred tax liabilities 316.5 277.7 38.8 14.0%

Employee benefit obligations 175.0 169.3 5.7 3.4%

Other liabilities and provisions 1,152.4 1,072.4 80.0 7.5%

Current liabilities 6,335.8 6,194.3 141.5 2.3%

Borrowings, other debt instruments and finance lease liabilities 1,151.7 1,687.6 -535.9 -31.8%

Derivative financial instruments 21.1 72.7 -51.6 -71.0%

Trade payables 2,351.7 2,201.7 150.0 6.8%

Current tax payables 472.5 210.0 262.5 125.0%

Employee benefit obligations 129.1 145.3 -16.2 -11.1%

Other liabilities and provisions 2,209.7 1,877.0 332.7 17.7%

The increase in the LOTOS Group's equity as at the end of September 2018 to PLN 11,955.2m (up by PLN 1,242.7m on 2017) was driven primarily by higher retained earnings (up by PLN 1,293.8m), which were reduced by foreign exchange losses on valuation of cash flow hedges recognised in capital reserves, adjusted by the tax effect of PLN -59.9m.

The share of equity in total equity and liabilities increased by 1.9pp year on year, to 52.5%.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Key changes in liabilities (up by PLN 363.9m):

• PLN 412.7m increase in other liabilities and provisions (mainly due to excise duty, fuel charge, VAT, and settlements under joint operations in the Upstream segment); • PLN 262.5m increase in current tax payables; • PLN 150.0m increase in trade payables; • PLN 434.1m decrease in borrowings, other debt instruments and finance lease liabilities, reflecting mainly a partial repayment of the Parent's investment facilities, loans contracted by LOTOS Norge S.A. and AB LOTOS Geonafta, as well as redemption of some of the bonds issued by the Group.

As at September 30th 2018, the LOTOS Group’s financial debt totalled PLN 3,991.8m, down by PLN 434.1m on December 31st 2017. The ratio of financial debt adjusted for free cash to equity was 15.7%, down 7.7pp on December 31st 2017. Net debt was PLN 1,873.3m. The ratio of net debt to LIFO-based EBITDA as at September 30th 2018 was 0.6.

Consolidated statement of cash flows

PLNm Q3 2018 Q2 2018 Q3 2017

Cash flows from operating activities 1,299.1 532.8 1,243.1

Cash flows from investing activities -178.9 -217.7 -275.3

Cash flows from financing activities -400.1 -290.2 -322.9

Effect of exchange rate fluctuations on cash held -1.4 8.0 -2.4

Change in net cash 718.7 32.9 642.5

Cash at beginning of period 1,399.3 1,366.4 887.0

Cash at end of period 2,118.0 1,399.3 1,529.5

As at September 30th 2018, the LOTOS Group’s cash balance (including overdraft facilities) was PLN 2,118.0m. Net cash flows in Q3 2018 added PLN 718.7m to cash and cash equivalents.

In Q3 2018, net cash flows from operating activities were positive at PLN 1,299.1m, driven mainly by net profit before depreciation and amortisation and a decrease in inventories in the quarter.

Negative net cash flows from investing activities (PLN -178.9m) were mainly attributable to purchases of property, plant and equipment and other intangible assets, chiefly for the Upstream segment.

Net cash flows from financing activities in Q3 2018 stood at PLN -400.1m and chiefly included negative net balance of proceeds from borrowings and repayments of borrowings (principal and interest) of PLN -235.4m, and dividends paid.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Supplementary information

I. Grupa LOTOS S.A. shares

In the period from the issue of the report for H1 2018, i.e. August 9th 2018, to the issue date of this Q3 2018 report, i.e. October 30th 2018, there was a change in major holdings of the Company shares. On August 10th 2018, the Company was notified by Nationale-Nederlanden Otwarty Fundusz Emerytalny S.A. that the shareholder exceeded the 5% threshold of total voting rights at the Company's General Meeting (→ Current Report No. 25/2018).

Shareholders of Grupa LOTOS S.A. as at October 30th 2018, i.e. the date of issue of this Q3 2018 report

Share of total voting rights Shareholder Number of shares/voting rights equivalent to percentage of share equivalent to par value of shares capital held

State Treasury 98,329,515 53.19%

Nationale-Nederlanden Otwarty 9,250,694 5.00% Fundusz Emerytalny S.A.

Other 77,293,153 41.81%

Total 184,873,362 100%

II. Changes in the number of Company shares or rights to Company shares held by the management and supervisory staff, in accordance with the information available to the Company

To the best of the Company’s knowledge and based on the representations of October 29th 2018 made for the purpose of this Q3 2018 report, as at this report issue date no Management Board or Supervisory Board members held any Company shares or rights to Company shares. Their holdings in the Company did not change from August 9th 2018, i.e. the issue date of the report for the first half of 2018.

III. Material court, arbitration or administrative proceedings concerning liabilities or claims of the Company or its subsidiaries, and material settlements under court proceedings

As at September 30th 2018, there were no pending material court or arbitration proceedings concerning liabilities or claims. The Company has no knowledge of any material court, arbitration or administrative proceedings or other risks.

IV. Loan sureties or guarantees, or other guarantees issued by Grupa LOTOS S.A. or its subsidiaries jointly to one entity or its subsidiary, where the aggregate value of such sureties or guarantees is significant

An unconditional and irrevocable guarantee issued by LOTOS Upstream Sp. z o.o. for the benefit of the government of Norway, covering the exploration and production activities of LOTOS Exploration and Production Norge AS on the Norwegian Continental Shelf, was effective as at September 30th 2018. The guarantee replaced a similar earlier guarantee issued on December 17th 2008 by LOTOS Petrobaltic S.A. for the benefit of the government of Norway, covering the activities of LOTOS Exploration and Production Norge WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

AS, which was returned to LOTOS Petrobaltic S.A. on January 3rd 2018. In the guarantee, LOTOS Upstream Sp. z o.o. undertook to assume any financial liabilities which may arise in connection with the operations of LOTOS Exploration and Production Norge AS on the Norwegian Continental Shelf, consisting in exploration for and extraction of the natural resources from the sea bottom, including their storage and transport using means of transport other than ships.

On August 8th 2017, the Head of the First Tax Office in Gdańsk issued confirmations of acceptance of an excise bond valid for the period from August 20th 2017 to August 19th 2019 for a total lump sum of PLN 240m. The excise bond was submitted in the form of two promissory notes.

V. Information material to the assessment of the personnel, assets, financial condition and financial results of the LOTOS Group and their changes, and to the assessment of Grupa LOTOS S.A.’s ability to fulfil its obligations

Appointment of Vice President of the Management Board, Corporate Affairs

On September 10th 2018, the Supervisory Board of Grupa LOTOS S.A. appointed Mr Jarosław Wittstock to the Company’s Management Board of the 10th joint term of office, to serve as Vice President in charge of Corporate Affairs, with effect from September 11th 2018. Mr Wittstock has submitted a representation to the effect that he is not entered in the Register of Insolvent Debtors maintained under the Act on the National Court Register, is not involved in any activity competing with Grupa LOTOS S.A.'s business, and is not a partner in any partnerships, including partnerships under civil law, or member of corporate bodies of any corporations, or member of governing bodies of any other legal entities competing with Grupa LOTOS S.A.

Upstream Segment reorganisation

On December 19th 2017, a plan of cross-border merger through acquisition was adopted, with LOTOS Petrobaltic S.A. of Gdańsk as the acquirer and Miliana Shipholding Company Ltd. of Nicosia, Cyprus (wholly-owned subsidiary of LOTOS Petrobaltic) as the acquiree. Following the acquisition of Miliana Shipholding Company Ltd. by LOTOS Petrobaltic S.A., all the acquiree’s assets and liabilities will be transferred to the acquirer, and the acquiree will be deleted from the relevant register. The acquirer will assume all the rights and obligations of the acquiree by way of universal succession, with its legal form, name and registered office unchanged.

Since LOTOS Petrobaltic is the sole shareholder of Miliana Shipholding Company Ltd., the planned merger may be a simplified process. The merger plan was published on LOTOS Petrobaltic’s website and in the Cyprus Official Government Gazette on December 28th and December 29th 2017, respectively. On February 26th 2018 and March 13th 2018, respectively, LOTOS Petrobaltic S.A. (as the acquirer) sent to Grupa LOTOS S.A. the first and second notification of its intention to merge the Acquirer with Miliana Shipholding Company Ltd., on the terms set forth in the merger plan announced on December 28th 2017.

On January 8th 2018, the Boards of Directors of Miliana Shipholding Company Ltd. and Miliana Shipping Group Ltd., both registered in Cyprus, approved the merger plan for the two companies. As a result of the merger through acquisition, Miliana Shipholding Company Ltd. (the sole shareholder of the acquiree) will acquire Miliana Shipping Group Ltd. In consequence, all assets and liabilities of the acquiree will be transferred to the acquirer, and the acquiree will be deleted from the relevant register.

The merger plans for the above companies, approved by their respective Boards of Directors, have been sent to the Cypriot court with jurisdiction over the companies’ registered offices. The merger will be effected in two

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results stages, with the first stage involving a joint meeting of the merging companies, held to hear the parties and to jointly adopt and approve the merger plan. On September 12th 2018, a meeting of shareholders and creditors of the merging companies, i.e. Miliana Shipholding Company Ltd. and Miliana Shipping Group Ltd., was held with the participation of the adviser appointed by the Cypriot court, during which the merger plan was adopted. The next step in the merger process is approval of the merger plan by the Cypriot court.

Resolutions of Annual General Meeting

The Company’s Annual General Meeting held on June 28th 2018 and resumed after adjournment on July 12th 2018 (the “AGM”) passed resolutions which are published on the → website. On August 10th 2018, the Management Board of Grupa LOTOS S.A. was notified of an action having been filed to revoke Resolutions No. 3, No. 5, No. 7–10, and No. 11, passed by the Annual General Meeting on June 28th 2018. In its → Current Report No. 24/2018, the Company announced that it intends to file a response to the statement of claim requesting its dismissal. However, as at the date of this report the Company had received no official letter from the court to which the Company could refer to.

VI. Management Board’s position regarding the feasibility of meeting forecasts published earlier for a given year in the light of the results presented in this quarterly report in relation to the forecast results

The Management Board of Grupa LOTOS S.A. did not publish any financial guidance for 2018. Following announcement by the Company of the “Grupa LOTOS Strategy for 2017–2022,” the Management Board is of the opinion that the LOTOS Group’s results for the first nine months of 2018 and Q3 2018 do not threaten the delivery of strategic objectives.

VII. Factors with a bearing on the Group’s results in the next quarter or in a longer term, according to Grupa LOTOS S.A.

Key factors which, in the Company’s opinion, may affect performance in Q4 2018 include:

• Macroeconomic environment, including in particular prices of crude oil, natural gas and petroleum products and the USD/PLN exchange rate, which has a bearing on the LOTOS Group’s financial performance as the prices of crude oil and of some products are quoted in the US dollar and Grupa LOTOS S.A. has US dollar-denominated debt; • Changes in the supply of and demand for petroleum products in Poland and in Europe; the demand for diesel oil is expected to rise in the long run, while the demand for motor gasolines is expected to weaken; these trends are reflected in the strategy implemented by the LOTOS Group; • Continuation of projects in the Downstream segment (EFRA Project) and projects in the Upstream segment; • Optimisation measures in the Downstream segment to maximise the refining margin of Grupa LOTOS S.A.; • Further consolidation of the LOTOS Group’s market position, with special emphasis on the improvement of profitability in Retail.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

VIII. Material developments after the reporting date

• On October 8th 2018, the Extraordinary General Meeting of LOTOS Upstream Sp. z o.o. passed a resolution to increase the company’s share capital from PLN 576,000,000 to PLN 886,000,000, i.e. by PLN 310,000,000, through the issue of 3,100,000 new shares with a par value of PLN 100 per share. All the new shares were acquired by Grupa LOTOS against a cash contribution of PLN 310,000,000. As at the date of this report, the share capital increase had not been registered in the Business Register of the National Court Register. • On October 4th 2018, the General Meeting of LOTOS Exploration and Production Norge AS passed a resolution on private placement with LOTOS Upstream Sp. z o.o. of 800,000,000 warrants, each carrying the right to acquire one Series B share with a par value of NOK 1.00 per share. Rights incorporated in the warrants may be exercised by June 30th 2019. As at the date of this report, the share capital increase had not been registered in the business register of Brønnøysund.

IX. Transaction or series of transactions concluded by Grupa LOTOS S.A. or its subsidiaries with related parties other than at arm’s length

In the reporting period, Grupa LOTOS S.A. did not enter into any related-party transactions on non-arm’s length terms.

X. Overview of changes in the LOTOS Group’s organisation and consolidated entities as at September 30th 2018

In the reporting period, there were no material changes in the organisation of the Group or in the list of consolidated entities. For the list of companies making up the LOTOS Group, see the Q3 2018 financial report, Section I.2, pages 8–10.

Information about processes / events at subsidiaries in Q3 2018

Company Description

Infrastruktura Kolejowa On June 28th 2018, the Extraordinary General Meeting of Infrastruktura Sp. z o.o. w likwidacji (in Kolejowa Sp. z o.o. passed a resolution to dissolve the company liquidation) and open liquidation proceedings as of June 28th 2018. Furthermore, on June 28th 2018, by way of a resolution of the General Meeting, Mr Marek Zygało, President of the Management Board, was appointed as liquidator of Infrastruktura Kolejowa Sp. z o.o. On August 10th 2018, the company's changed name, i.e. Infrastruktura Kolejowa Sp. z o.o. w likwidacji (in liquidation) was entered in the Business Register.

Negros 1 Sp. z o.o. – In order to purchase a drilling platform, a concept was developed which company acquisition and provides for the acquisition of a special purpose vehicle in the form of a limited amendments to the liability company which will ultimately become the owner of the drilling platform. company's Articles of In line with the concept, Technical Ship Management Sp. z o.o. of Gdańsk Association (including a ("TSM"), a Miliana Shipholding Group company, will acquire 100% of shares change of the company’s in the SPV (with a share capital of PLN 5,000.00 (five thousand złoty). On June name to SPV Petro Sp. z 21st 2018, the General Meeting of TSM passed a resolution approving the o.o.) acquisition of 100% of shares in Negros 1 Sp. z o.o., a limited liability company of Warsaw. On June 26th 2018, the parties entered into a share purchase agreement under which TSM acquired all shares in Negros 1 Sp. z o.o. (100 shares) for PLN 8,000.00. On June 21st 2018, amendments were made to Negros 1 Sp. z o.o.’s Articles of Association, including a change of its registered

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b Grupa LOTOS Management’s Discussion and Analysis of Q3 2018 consolidated results

Company Description

office and name to SPV Petro Sp. z o.o. of Gdańsk. On August 10th 2018, the new consolidated text of SPV Petro Sp. z o.o.’s Articles of Association was registered, including the change of the company’s name as described above.

XI. Brief description of Grupa LOTOS S.A.’s and of the LOTOS Group’s significant achievements or failures in the reporting period, including identification of key achievements and events related to the Company and the Group

Dividend payment

The Company's Annual General Meeting held on June 28th 2018 resolved to pay out dividend. PLN 184,873,362.00 (i.e. PLN 1.00 per share) was paid as dividend on September 29th 2018. The dividend record date was set for September 12th.

EFRA Project – update

On July 13th 2018, the Company's Management Board updated the information on the implementation of the EFRA Project (see → Current Report No. 21/2018).The Company’s Management Board announced that talks were being held between LOTOS Asfalt Sp. z o.o. (“LOTOS Asfalt”, a subsidiary), the Company and KT - Kinetics Technology S.p.A. (“KT”, main contractor of the EFRA Project) to set the deadline for the DCU (delayed coking unit) to reach the RFSU (Ready for Start Up) status.

The Company’s Management Board estimated that the target economic and financial effects of all of the EFRA Project facilities (as announced in Current Report No. 24/2015 and the Company’s subsequent public announcements) will not fully show in the Company’s consolidated results until the second quarter of 2019. As at June 30th 2018, the percentage of the EFRA Project’s completion was 95.5% (December 31st 2017: 89.8%), with two of the three key project units, i.e. HGU (hydrogen generation unit) and HVDU (hydrowax vacuum distillation unit), having reached the RFSU status. The Company’s Management Board has pointed out that the delays in the EFRA Project are beyond control of the Company or LOTOS Asfalt. The Company will promptly disclose any material arrangements affecting the project implementation in current reports.

XII. Factors and events, including of a non-recurring nature, having a material bearing on the condensed financial statements

The reporting period saw remeasurement of a provision for contingent payments under the agreement to purchase Sleipner assets in Norway. Following the remeasurement, the Upstream segment’s EBIT reported for Q3 2018 declined by PLN 18.2m. There were no other factors or events of a non-recurring nature having a material bearing on the condensed financial statements. For a discussion of changes to material reporting items and factors with a bearing on the Group’s financial performance in the reporting period, as well as a short summary of results achieved by each business segment, see this Management’s Discussion and Analysis.

WorldReginfo - 039b12b5-4115-4904-9a6f-637fbfee568b