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Property, plant and equipment and intangible assets

Notes to the financial statements
13. Property, plant and equipment and intangible assets   
NoteDecember 31st 2017December 31st 2016
Non-current assets of the Downstream segment13.18924.78431.7
Property, plant and equipment13.1.18761.58261.7
Intangible assets, including:163.2170
Goodwill13.1.245.645.6
Other intangible assets13.1.3117.6124.4
Non-current assets of the Upstream segment13.227092871.8
Property, plant and equipment2404.22390
Intangible assets, including:304.8481.8
Goodwill1.11.1
Other intangible assets303.7480.7
Total property, plant and equipment and intangible assets11633.711303.5
including:
Property, plant and equipment11165.710651.7
Intangible assets468651.8
13.1.1 Property, plant and equipment of the downstream segment        
LandBuildings, structuresPlant and equipmentVehicles, otherProperty, plant and equipment under constructionTotal
Gross carrying amount Jan 1 2017 517.44562.45593.3667.2109212432.3
Purchase---20.7999.21019.9(1)
Transfer from property, plant and equipment under construction6.347.2150.834.6-238.9-
Borrowing costs ----37.137.1
Expenditure written off due to project discontinuation-----13.3-13.3
Sale--1.1-32.2(2)-5.4--38.7
Other---0.8-3-1.7-5.5
Gross carrying amount Dec 31 2017523.74608.55711.1714.11874.413431.8
Accumulated depreciation/amortisation Jan 1 201716.11609.42148.6319.4-4093.5
Depreciation and amortisation1.7177.5252.792.3-524.2
Sale--1.1-31.7(2)-5.6--38.4
Other--0.30.9-1.2
Accumulated depreciation/amortisation Dec 31 201717.81785.82369.9407-4580.5
Impairment losses January 1st 20171.551.46.54.113.677.1
Recognised-23.82.61.50.628.5
Used/Reversed--1.6-0.2-0.9--2.7
Other-----13.1-13.1
Impairment losses Dec 31 20171.573.68.94.71.189.8
Net carrying amount Dec 31 2017504.42749.13332.3302.41873.38761.5
(1) Capital expenditure included chiefly expenditure on the construction of a delayed coking unit with auxiliary infrastructure of the EFRA Project (PLN 821.9m), purchase of catalysts (PLN 96.9m) and spare parts (PLN 20.8m), as well as expansion of the service station chain (PLN 32.8m), and construction of a hydrogen recovery unit (PLN 19.5m).
(2) Including retirement of spent catalysts in Grupa LOTOS S.A. for an amount of (PLN 19.0m).
LandBuildings, structuresPlant and equipmentVehicles, otherProperty, plant and equipment under constructionTotal
Gross carrying amount Jan 1 2016 510.24474.65556.4620.2395.911557.3
Purchase---20.4903.1923.5(1)
Transfer from property, plant and equipment under construction12.89353.449.5-208.7-
Borrowing costs ----4.84.8
Reclassification to non-current assets (or disposal group) held for sale----2.1--2.1
Sale-5.6-5.6-15.3-12.1-0.4-39
Other-0.4-1.2-8.7-2.7-12.2
Gross carrying amount Dec 31 2016 517.44562.45593.3667.2109212432.3
Accumulated depreciation/amortisation Jan 1 201614.81436.81926.4266.7-3644.7
Depreciation and amortisation1.7174.9236.161.6-474.3
Reclassification to non-current assets (or disposal group) held for sale----1.4-(1,4) 
Sale-0.4-2.6-14.5-9.1--26.6
Other-0.30.61.6-2.5
Accumulated depreciation/amortisation Dec 31 2016 16.11609.42148.6319.4-4093.5
Impairment losses January 1st 20161.244.45.72.613.667.5
Recognised0.311.312-14.6
Used/Reversed--4.3-0.2-0.5--5
Impairment losses Dec 31 20161.551.46.54.113.677.1
Net carrying amount Dec 31 2016 499.82901.63438.2343.71078.48261.7
(1) Capital expenditure included chiefly expenditure on the construction of a delayed coking unit with auxiliary infrastructure of the EFRA Project (PLN 672.3m), as well as expansion of the service station chain (PLN 105.5m) and construction of a hydrogen recovery unit (PLN 55.6m).
13.1.2 Goodwill of the downstream segment  
Goodwill is allocated to cash-generating units, as presented in the table below:
December 31st 2017December 31st 2016
Goodwill arising on the acquisition of an organised part of business by LOTOS Paliwa Sp. z o.o.:
- wholesale of LPG1010
- service stations chains (ESSO, Slovnaft Polska)33,733.7
Total43.743.7
Goodwill arising on acquisition of other entities1.91.9
Total goodwill45.645.6
13.1.3 Other intangible assets of the downstream segment     
 Patents, trademarks and licencesOtherIntangible assets under developmentTotal
Gross carrying amount Jan 1 2017 205.337.117.3259.7
Purchase-0.17.27.3
Transfer from intangible assets under development3.50.5-4-
Expenditure written off due to project discontinuation---9(1)-9
Other-1.9-0.3-1.1-3.3
Gross carrying amount Dec 31 2017206.937.410.4254.7
Accumulated depreciation/amortisation Jan 1 2017111.315-126.3
Depreciation and amortisation11.41.4-12.8
Other-1.9-0.1--2
Accumulated depreciation/amortisation Dec 31 2017120.816.3-137.1
Impairment losses January 1st 2017--99
Recognised----
Used/Reversed---9(1)-9
Impairment losses Dec 31 2017----
Net carrying amount Dec 31 201786.121.110.4117.6
Gross carrying amount Jan 1 2016 197.936.318.8253
Purchase-0.277.2
Transfer from intangible assets under development7.60.9-8.5-
Other-0.2-0.3--0.5
Gross carrying amount Dec 31 2016 205.337.117.3259.7
Accumulated depreciation/amortisation Jan 1 2016100.913.9-114.8
Depreciation and amortisation10.41.2-11.6
Other--0.1--0.1
Accumulated depreciation/amortisation Dec 31 2016 111.315-126.3
Impairment losses January 1st 2016--99
Recognised----
Used/Reversed----
Impairment losses Dec 31 2016--99
Net carrying amount Dec 31 2016 9422.18.3124.4
(1) Refining units (no effect on net profit or loss).
13.2 Non-current assets of the upstream segment   
NoteDecember 31st 2017December 31st 2016
Oil and gas exploration and evaluation assets13.2.1256.9396.7
Property, plant and equipment52.255.7
Intangible assets204.7341
Oil and gas development and production assets13.2.22103.42098.2
Property, plant and equipmentW 2017 roku Grupa Kapitałowa LOTOS nie posiadała żadnego odbiorcy, którego udział w przychodach ze sprzedaży ogółem Grupy Kapitałowej LOTOS przekroczył 10%.1966.9
Intangible assets85.4131.3
Other non-current assets of the upstream segment 13.2.3348.7376.9
Property, plant and equipment334367.4
Intangible assets14.79.5
Total non-current assets of the upstream segment27092871.8
including:
Property, plant and equipment2404.22390
Intangible assets304.8481.8
13.2.1 Oil and gas exploration and evaluation assets         
Property, plant and equipment classified as exploration and evaluation assetsIntangible assets classified as exploration and evaluation assetsTotal
NotePolandPolandNorwayLithuania
Gross carrying amount Jan 1 2017 167.69.3429.710.6617.2
Purchase20.24.432.8-57.4
Exchange differences on translating foreign operations---44.4-0.6-45
Reclassification to development assets---200.8(2)--200.8
Gross carrying amount Dec 31 2017187.813.7217.310428.8
Accumulated depreciation/amortisation Jan 1 2017-8.9--8.9
Depreciation and amortisation-0.5--0.5
Accumulated depreciation/amortisation Dec 31 2017-9.4--9.4
Impairment losses January 1st 2017111.9-89.110.6211.6
Recognised9.423.7(1)---23.7
Exchange differences on translating foreign operations---7.3-0.6-7.9
Reclassification to development assets---64.9(2)--64.9
Impairment losses Dec 31 2017135.6-16.910162.5
Net carrying amount Dec 31 201752.24.3200.4-256.9
(1) Expenditure on exploration and evaluation work on the Kamień Pomorski area (of PLN 23.7m).
(2) Utgard (formerly Alfa Sentral) licences forming part of the acquired Sleipner assets in Norway.
Property, plant and equipment classified as exploration and evaluation assetsIntangible assets classified as exploration and evaluation assetsTotal
NotePolandPolandNorwayLithuania
Gross carrying amount Jan 1 2016 167.89.9467.210.2655.1
Purchase1.70.352(2)-54
Exchange differences on translating foreign operations--43.60.444
Expenditure written off due to project discontinuation9.4-1.9(1)-0.9(1)-133.1(3)--135.9
Gross carrying amount Dec 31 2016 167.69.3429.710.6617.2
Accumulated depreciation/amortisation Jan 1 2016-8--8
Depreciation and amortisation-1.6--1.6
Expenditure written off due to project discontinuation9.4--0.7(1)---0.7
Accumulated depreciation/amortisation Dec 31 2016 -8.9--8.9
Impairment losses January 1st 2016490.2125.510.2184.9
Recognised9.464.8(1)-73.4(4)-138.2
Exchange differences on translating foreign operations--10.90.411.3
Used/Reversed9.4-1.9(1)-0.2(1)-120.7(3)--122.8
Impairment losses Dec 31 2016111.9-89.110.6211.6
Net carrying amount Dec 31 2016 55.70.4340.6-396.7
(1) Expenditure on exploration and evaluation work related to the Słupsk area (decision to abandon the project) and the Gaz Południe area (a PLN 64.8m write-off of expenditure on seismic surveys).
(2) Including expenditure on Sleipner assets (PLN 18.7m) and Heimdal assets (PLN 31.2m).
(3) Capitalised expenditures related to PL643 and PL655 licences (effect on the Group’s profit/(loss): PLN 12.3m).
(4) Including the Utgard (formerly Alfa Sentral) field assets of PLN 67.6m and PL797 licence of PLN 5.8m.
Property, plant and equipment are classified as exploration and evaluation assets until the technical feasibility and commercial viability of extracting the discovered resources are demonstrated.
Due to significant market volatility, in particular with respect to oil and gas prices, the adopted assumptions may be subject to justifiable changes, and such changes may necessitate a revision of the carrying amounts of the Utgard field’s assets in the future. To determine the effect of key factors on the test results, the Group carried out an analysis of sensitivity to a -15%/+15% change in oil and gas price, -15%/+15% change in production volumes, -15%/+15% change in the USD/NOK exchange rate, and -0.5pp/+ 0.5pp change in the discount rate. The table below presents the estimated changes in impairment losses following changes in the key assumptions:
FactorChangeImpact on impairment losses
PLN m
Crude oil and gas prices64.9-20.3
Production volume64.9-8
USD/NOK exchange rate64.9-11.8
Discount rate-4.9
 
13.2.2 Oil and gas development and production assets             
Oil and gas development assetsOil and gas production assetsTotal
NotePolandNorwayTotalPolandNorwayLithuaniaTotal
Gross carrying amount Jan 1 2017 -1592.11592.11650.41603.4659.83913.65505.7
Purchase-82(1)82154.8(2)47.72.7205.2287.2
Exchange differences on translating foreign operations--224.4-224.4--208.1-37.8-245.9-470.3
Estimated costs of decommissioning of oil and gas extraction facilities---6.6-35.6--29-29
Reclassification of refining and other assets to oil and gas development and production assets---0.1--0.10.1
Reclassification of exploration and evaluation assets-200.8(3)200.8----200.8
Borrowing costs ---12.5--12.512.5
Expenditure written off due to project discontinuation----0.5---0.5-0.5
Other-----1.71.71.7
Gross carrying amount Dec 31 2017-1650.51650.51823.91407.4626.43857.75508.2
Accumulated depreciation/amortisation Jan 1 2017---46182729315811581
Depreciation and amortisation---38.4206.418.2263263
Exchange differences on translating foreign operations-----120.5-17.1-137.6-137.6
Reclassification to production assets---0.1--0.10.1
Accumulated depreciation/amortisation Dec 31 2017---499.5912.9294.11706.51706.5
Impairment losses January 1st 2017-1579.71579.7-40.1206.7246.81826.5
Recognised9.4-----32.932.932.9
Exchange differences on translating foreign operations--208.4-208.4--5.2-12.4-17.6-226
Reclassification of exploration and evaluation assets-64.9(3)64.9----64.9
Impairment losses Dec 31 2017-1436.21436.2-34.9227.2262.11698.3
Net carrying amount Dec 31 2017-214.3214.31324.4459.6105.11889.12103.4
(1) Expenditures on YME (PLN 47.2m) and Sleipner (PLN 34.9m) assets.
(2) Expenditure on the B8 field.
(3) Utgard (formerly Alfa Sentral) licence forming part of the acquired Sleipner assets in Norway.
Oil and gas development assetsOil and gas production assetsTotal
NotePolandNorwayTotalPolandNorwayLithuaniaTotal
Gross carrying amount Jan 1 2016 -1452.41452.41384.71497.2636.135184970.4
Purchase-12-112213.2(2)46.3-50.1259.6271.6
Exchange differences on translating foreign operations-127.7127.7-146.424.3170.7298.4
Estimated costs of decommissioning of oil and gas extraction facilities----2.9-87.9-0.4-91.2-91.2
Reclassification to oil and gas production assets---58.5(3)--58.558.5
Expenditure written off due to project discontinuation----3.3-4---3.3-3.3
Other---0.21.4-0.31.31.3
Gross carrying amount Dec 31 2016 -1592.11592.11650.41603.4659.83913.65505.7
Accumulated depreciation/amortisation Jan 1 2016---398.4310.3258.1966.8966.8
Depreciation and amortisation---38.8471.825.1535.7535.7
Exchange differences on translating foreign operations----44.910.15555
Reclassification to oil and gas production assets---27.1-3--27.127.1
Expenditure written off due to project discontinuation----3.3-4---3.3-3.3
Other------0.3-0.3-0.3
Accumulated depreciation/amortisation Dec 31 2016 ---46182729315811581
Impairment losses January 1st 2016-1452.41452.4-40.6194.3234.91687.3
Recognised9.4-----12.4-712.412.4
Exchange differences on translating foreign operations-127.3127.3-3.97.511.4138.7
Used/Reversed-----4.4-6-7.5-8-11.9-11.9
Impairment losses Dec 31 2016-1579.71579.7-40.1206.7246.81826.5
Net carrying amount Dec 31 2016 -12.412.41189.4736.3160.12085.82098.2
(1) Expenditure on the YME field.
(2) Expenditure on development of the B-8 field (PLN 212.4m) and the B-3 field (PLN 0.8m).
(3) Offshore gas pipeline from the B-3 field.
(4) Expenditure related to the Piła area (no effect on the LOTOS Group’s profit/(loss)).
(5) Expenditure on Sleipner assets (PLN 42.5m) and Heimdal assets (PLN 3.6m)
(6) Expenditure on Heimdal assets.
(7) Production infrastructure on the: Auksoras, Vėžaičiai, Kretinga, Ablinga and Ližiai fields.
(8) Girkaliai field.
The table below presents the estimated changes in potential impairment losses on the tested Heimdal and Sleipner assets following changes in the key assumptions:
FactorChangeImpact on impairment losses
PLN m
Crude oil and gas prices20.7-12.8
Production volume19.5-11.6
USD/NOK exchange rate20.4-12.5
Discount rate-4.9
 
 
The table below presents the estimated changes in impairment losses on the Lithuanian assets referred to above following changes in the key assumptions: 
FactorChangeImpact on impairment losses
PLN m
Crude oil and gas prices32.3-32.6
Production volume26-26.2
USD/EUR exchange rate24-24.2
Discount rate-2.92.9
 
Assets related to future costs of decommissioning of oil and gas extraction facilities
Oil and gas development assetsOil and gas production assetsTotal
NorwayPolandNorwayLithuaniaTotal
Gross carrying amount Jan 1 2017 134.9107.4821.11.7930.21065.1
Estimated costs of decommissioning of oil and gas extraction facilities-6.6-35.7--29.1-29.1
Exchange differences on translating foreign operations-17.4--103.8-0.1-103.9-121.3
Gross carrying amount Dec 31 2017117.5114681.61.6797.2914.7
Accumulated depreciation/amortisation Jan 1 2017-80.1405.81.6487.5487.5
Depreciation and amortisation-1.2100-101.2101.2
Exchange differences on translating foreign operations---59--59-59
Accumulated depreciation/amortisation Dec 31 2017-81.3446.81.6529.7529.7
Impairment losses January 1st 2017134.9-33.1-33.1168
Recognised------
Exchange differences on translating foreign operations-17.4--4.2-0.1-4.3-21.7
Used/Reversed------
Impairment losses Dec 31 2017117.5-28.9-0.128.8146.3
Net carrying amount Dec 31 2017-32.7205.90.1238.7238.7
Oil and gas Oil and gas production assetsTotal
development assets
NorwayPolandNorwayLithuaniaTotal
Gross carrying amount Jan 1 2016 122.8108.1829.82939.91062.7
Estimated costs of decommissioning of oil and gas extraction facilities--2.9-87.9-0.4-91.2-91.2
Exchange differences on translating foreign operations12.1-79.20.179.391.4
Reclassification to oil and gas development and production assets-2.2-1--2.22.2
Gross carrying amount Dec 31 2016 134.9107.4821.11.7930.21065.1
Accumulated depreciation/amortisation Jan 1 2016-76.61241.3201.9201.9
Depreciation and amortisation-1.3261.60.2263.1263.1
Exchange differences on translating foreign operations--20.20.120.320.3
Reclassification of development assets to production assets-2.2-1--2.22.2
Accumulated depreciation/amortisation Dec 31 2016 -80.1405.81.6487.5487.5
Impairment losses January 1st 2016122.8-32-32154.8
Recognised------
Exchange differences on translating foreign operations12.1-3.1-3.115.2
Used/Reversed---2--2-2
Impairment losses Dec 31 2016134.9-33.1-33.1168
Net carrying amount Dec 31 2016 -27.3382.20.1409.6409.6
(1) Offshore gas pipeline from the B-3 field.
13.2.3 Other non-current assets of the upstream segment           
LandBuildings, structuresPlant and equipmentVehicles, otherProperty, plant and equipment under constructionIntangible assetsTotal
Gross carrying amount Jan 1 2017 11.453.169.1560.415.331.1740.4
Purchase--0.50.112.59.923
Transfer from property, plant and equipment under construction--0.313.6-13.9--
Exchange differences on translating foreign operations---2-30.5-0.2-3.2-35.9
Reclassification of refining and other assets to production assets----0.1---0.1
Other--0.9---0.9
Sale---0.1-44.1-0.1--44.3
Gross carrying amount Dec 31 201711.453.168.7499.413.637.8684
Accumulated depreciation/amortisation Jan 1 20174.22039.1272.8-21.6357.7
Depreciation and amortisation0.31.83.135.4-3.243.8
Exchange differences on translating foreign operations---1.5-25.9--1.7-29.1
Reclassification of refining and other assets to production assets----0.1---0.1
Sale---0.1-39.7---39.8
Other---0.3--0.3
Accumulated depreciation/amortisation Dec 31 20174.521.840.6242.8-23.1332.8
Impairment losses January 1st 2017--0.65.10.1-5.8
Recognised---0.8--0.8
Exchange differences on translating foreign operations----0.5---0.5
Used/Reversed----3.5-0.1--3.6
Impairment losses Dec 31 2017--0.61.9--2.5
Net carrying amount Dec 31 20176.931.327.5254.713.614.7348.7
LandBuildings, structuresPlant and equipmentVehicles, otherProperty, plant and equipment under constructionIntangible assetsTotal
Gross carrying amount Jan 1 2016 11.496.384.6539.115.129.5776
Purchase--0.311.612.30.224.4
Transfer from property, plant and equipment under construction--0.110.6-10.7--
Exchange differences on translating foreign operations-0.10.712.8-1.715.3
Reclassification of refining and other assets to production assets--42.4-1-16.1-1----58.5
Expenditure written off due to project discontinuation-------
Sale---0.5-13.7--0.3-14.5
Other--0.9---1.4--2.3
Gross carrying amount Dec 31 2016 11.453.169.1560.415.331.1740.4
Accumulated depreciation/amortisation Jan 1 20163.934.445.5235.1-16.6335.5
Depreciation and amortisation0.32.3433.7-4.444.7
Exchange differences on translating foreign operations--0.611.2-0.912.7
Reclassification of refining and other assets to production assets--16.5-1-10.6-1----27.1
Sale---0.4-7.2--0.3-7.9
Other--0.2-----0.2
Accumulated depreciation/amortisation Dec 31 2016 4.22039.1272.8-21.6357.7
Impairment losses January 1st 2016--0.65.30.1-6
Recognised---5.4-2--5.4
Exchange differences on translating foreign operations---0.3--0.3
Used/Reversed----5.9---5.9
Impairment losses Dec 31 2016--0.65.10.1-5.8
Net carrying amount Dec 31 2016 7.233.129.4282.515.29.5376.9
(1) Offshore gas pipeline from the B-3 field.
(2) Including ships valued at PLN 5.3m, see Note 9.4.
Other property, plant and equipment and intangible assets of the upstream segment include ships and a multi-purpose mobile drilling rig.
13.3 Other information on property, plant and equipment and intangible assets  
Property, plant and equipment used under finance lease
December 31st 2017December 31st 2016
Gross carrying amount323.1312.3
Accumulated depreciation141.5103.7
Impairment losses-0.8
Net carrying amount 181.6207.8
The Group uses finance leases to finance primarily rolling stock assets (downstream segment); see also Note 22.4.
Allocation of depreciation20172016
Cost of sales716.6936.3
Distribution costs77.887.5
Administrative expenses37.135.6
Change in products and adjustments to cost of sales12.88.5
Total844.31067.9
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