1st Quarter Results

IDENTIFICATION DETAILS ON REPORT AND ISSUER

Quarterly report according to art. 227 from Law 297/2004

Report date: May 14, 2014Name of the Company: SNGN ROMGAZ SA

Headquarter: Medias, P-ta Constantin I.Motas, Nr.4, cod 551130Telephone number: 004-0269-201020 / 004-0269-846901

Fiscal Code: RO14056826

Trade Registry No: J32/392/2001

Subscribed and paid in share capital: RON 385,422,400

QUARTERLY REPORT

(based on the financial statements prepared in accordance with IFRS)

REGARDING THE ECONOMIC-FINANCIAL ACTIVITY OF

SNGN ROMGAZ SA AS OF March 31, 2014

(1.01.2014 - 31.03.2014)

PRESENTATION

SNGN Romgaz SA is a natural gas producer and supplier in Romania, and its core business segments are: gas exploration and production, gas supply, underground gas storage and electric power production.

A summary of the main indicators is described below:

· EBITDAincreased in the first quarter of 2014 by 26.6% as compared to the same period of 2013;

· EPS (net profit/share) is LEI 1.6/share;

· E&P(exploration, production): Production of natural gas recorded in the first quarter of 2014 confirmed the stabilization process, such recording a value of 1,463.8 million cubic meters (99.03% of the production recorded in Q1, 2013)

· Capital Expenditure amounted LEI 201.2 million, representing an increase of 63.3% as compared to the level achieved in Q1 2013;

· Revenues from the underground storage activity increased with LEI 56 million, namely by 55.84% as compared to the same period of 2013 due to the implementation of new underground storage tariffs in accordance with ANRE Order NO.26/2013;

· Revenues obtained from the electric power sector amounted LEI 87.99 million.

ORGANIZATIONAL STRUCTURE

The Company currently operates through seven branches:

· Sucursala de Productie Gaze Naturale Medias;

· Sucursala de Productie Gaze Naturale Targu Mures;

· Sucursala de Inmagazinare Subterana a Gazelor Naturale Ploiesti;

· Sucursala de Interventii, Reparatii Capitale si Operatii Speciale la Sonde Medias (SIRCOSS);

· Sucursala de Transport Tehnologic si Mentenanta Targu Mures (STTM);

· Sucursala Bratislava;

· Sucursala de Productie Energie Electrica Iernut.

SHAREHOLDER STRUCTURE

The Shareholder's structure as of March 31, 2014 is as follows:

PHYSICAL INDICATORS

The natural gas quantities produced, supplied, injected/ withdrawn into/from the underground storages between January-March 2014, compared to the same period last year, are described in the table below.

Million cubic meters

*) does not include the gas delivered to SPEE Iernut

As compared to the previous year, gas production (extraction, deliveries) recorded irrelevant differences. The extracted quantity was by 0.97% lower and the delivered production (including joint partnerships) increased by 0.99%.

The quantity delivered to SPEE Iernut is higher this year, since the power plant did not deliver electric power during the first months after being taken over on February 1, 2013.

ECONOMIC - FINANCIAL INDICATORS

The individual interim financial statements of the Company have been prepared in compliance with the International Financial Reporting Standards adopted by the European Union (IFRS). For the purpose of preparing these individual interim financial statements the functional currency of the Company is considered to be the Romanian Leu (LEI). The IFRS adopted by the UE differ in certain aspects from those issued by the IASB, nevertheless, the differences have no effect on the individual interim financial statements of the Company for the respective time period.

The individual interim financial statements have been reviewed by the independent auditor of the Company.

The Company income mainly comes from the natural gas sale activity (internal and import), gas underground storage services and electric power production.

The main economic - financial indicators as of March 31, 2014, as compared to the indicators referring to the same period of 2013 are described in the table below:

Summary of the interim statement of comprehensive income as of March 31, 2014

Revenue

For the first quarter of 2014, SNGN Romgaz SA generated revenue of LEI 1.45 billion compared to LEI 1.16 billion generated for the first quarter of 2013, resulting in increase of the revenue by 25.33%.

As can be seen from the breakdown of the revenue shown below, the increase is due mainly to the increase of the revenue from sale of gas from internal production. Although the volumes of gas deliveries from internal production have recorded a slight increase during the period ended March 31, 2014, as compare to the same period of last year, the revenues from sale of internal gas production increased mainly due to increase of gas sale prices according to the gas price liberalization calendar assumed by the Government of Romania.

Detailed Breakdown of Revenue (Thousand LEI)

Revenue from underground gas storage services was highly influenced by the changes of applied underground storage tariffs, as shown in the table below:

Import gas delivery volumes decreased during the first quarter of 2014 compared to the same period of last year, generating less revenue by 56%, as shown in the "Physical Indicators" table from above.  The reduction in import gas delivery volumes is due both to a decrease of gas demand on the market, as well as to provisions of ANRE Order No. 24/2013 for approval of allocation methodology for domestic gas production that is required for coverage of regulated market consumption, according to which the gas producers are no longer bound to deliver domestic gas mixed with import gas.

Revenues from electric power sale increased during the first quarter of 2014 by LEI 86 million compared to 2013. This increase is due to Iernut power plant take over starting from February 1st 2013; Iernut power plant (CTE Iernut) integration within SNGN ROMGAZ SA required complex works and obtaining operation authorizations, therefore CTE Iernut started its activity at the end of the first quarter of 2013.

Cost of Commodities Sold

For the three months ended March 31, 2014, cost of commodities sold decreased by 49.16%, from LEI 200 million during the first quarter of 2013 to LEI 102 million in 2014, mainly due to a reduction in sales of imported natural gas, and influenced by an increase related to acquisition of electric power services sold to Romgaz clients.

Investment Income

For the reporting period the investment income increased by 23.75%, (LEI 3.3 million), as a result of interest rate revenue increase.

Other revenues and losses

For the first quarter of 2014 a loss of LEI 12.4 million was generated mainly due to the set-up of a provision related to receivables in amount of LEI 10.2 million. The profit generated during the first quarter of 2013 was mainly due to the profit generated by reinstatement of receivables in amount of LEI 28.9 million related to Termoelectrica, as well as to reverse of provision related to overdue receivables of Electrocentrale Bucharest, in amount of LEI 653 million, under the condition of taking over CTE Iernut in exchange for paying off such debt, reversal which, together with the loss resulting from receivables in amount of LEI 612.5 million, generated a profit of LEI 40.5 million (namely the liquidation value established by an assessor for CTE IERNUT).

Changes in Inventory

The difference between gas withdrawn from and gas injected into UGSs in the first quarter of 2014 was higher than during the first quarter of the previous year.

Depreciation and Amortization

In the three months ended 30 March 2014, depreciation, amortization and impairment expense decreased by 41.86% from LEI 247 million (March 2013) to LEI 144 million (March 2014). This decrease was due to adjustment of impairment of abandoned projects, or in process of abandonment, related to natural gas exploration and production activity of LEI 91 million.

Employee benefit expense

For the reporting period employee salary, taxes and benefits increased to LEI 108 million, compared to LEI 91.6 million in the first quarter of 2013, mainly due to the increase in numbers of employees following the takeover of CTE Iernut on February 1st, 2013.

Exploration expense

For the reporting period ended 31 March 2014 there were no abandoned exploration projects compared to the same period of 2013.

Other expenses

The breakdown by elements of costs compared with other costs is shown in the table below:

"Other expenses" recorded an increase of 67.91% as of 31 March 2014, from LEI 150 million as of March 31, 2013 to LEI 252 million. This increase is mainly due to the expenses with other duties and taxes, namely:

- Increase of natural gas royalty costs, as a result of natural gas sale price increase;

- Recording the tax on special construction in the amount of LEI 24.5 million;

- Introduction starting from February 1, 2013 of the additional tax on the additional revenue (windfall tax) obtained as a result of deregulation of natural gas prices, which determined an increase of expenses of 80.5 million.

Other operating expenditure increased mainly due to the transportation costs incurred for gas consumed by CTE Iernut, as well as due to the increase of environment protection expenditures.

The electric power expenses decreased in the first quarter of 2014 as compared to the similar period of the previous year due to covering the largest part of own electric power consumption from CTE Iernut branch.

Other income

In the three months ended on March 31, 2014, the other income increased by 21.16%, LEI 2.5 million respectively, increase due to applied penalties.

Income tax expense

As of March 31, 2014, the Company recorded an income tax expense in amount of LEI 124 million as compared to income tax expense of LEI 112 million for the three months period ended March 31, 2013 mainly due to higher deferred income tax.

Profit for the year

In the first quarter of the year 2014, the Company's net profit increased by LEI 275.6 million (82.82%) from LEI 332 million to LEI 608 million recorded in the first three months of 2014, due to the cumulative effect of the items presented above.

Summary of Statement of individual financial position as of March 31, 2014

Non-current assets

The total non-current assets increased by 0.94%, i.e. LEI 58 million, from LEI 6,246 million as of December 31, 2013 to LEI 6,304 million due to the increase of tangible assets and of other intangible assets.

Other intangible assets

Other intangible assets increased by LEI 39 million in the period ended March 31, 2014, as compared to December 31, 2013, due to the increase of the value of survey works for natural gas discovery.

Current assets

Current assets increased by LEI 405.7 million as of March 31, 2014, mainly due to the increase of cash and cash equivalent.

Inventories

The decrease by 37.74% (LEI 175 million) is due to the decrease of the gas stock as a result of increased deliveries of gas from internal production to CTE Iernut, and the decrease of purchased import gas quantities.

Trade receivables and other receivables

Trade receivables increased by 6.42% based on the increase of revenues in the first quarter of the year 2014, as compared to the similar period of the previous year.

Cash and cash balances. Other financial assets

Cash, cash equivalent and other financial assets amounted at the end of the quarter to LEI 3,041 million, as compared to LEI 2,534.3 million at the end of 2013. This is due to the fact that in the first quarter of each year the equivalent value of gas delivered in the first months of winter is cashed, while at the end of the year collections are related to gas delivered in the period of autumn. Statistically, the largest gas quantities are requested and delivered in the winter months.

Equity

Retained earnings increased by the value of net profit made in the first three months of the year 2014.

Non-current liabilities

Increase of non-current liabilities by 0.5% is due to the increase of provisions for the decommissioning of fixed assets.

Current liabilities

Current liabilities decreased by LEI 146 million as of March 31, 2014, as compared to the beginning of the year.

Trade and other payables

The decrease by LEI 52.6 million is mainly due to the fact that the beneficiaries of gas delivered by SNGN Romgaz SA made lower advance payments as compared to the end of the year 2013, and the fact that import quantities continued to decrease in the first quarter of the year 2014, the import gas suppliers having lower balances on March 31, 2014 as compared to December 31, 2013.

Current tax liabilities

Current tax liabilities decreased by 36.78%, from LEI 200.9 million on 31 December 2013 to LEI 127 million for the first quarter of 2014 due to the reduction of the tax base.

Provisions

Provisions on short term decreased mainly due to the existence in the balance of the 2013 year-end of a provision for certificates of greenhouse gas emissions, and such certificates have been paid and used by SNGN ROMGAZ SA during 2014.

INDICATORS

Attached hereto are the individual interim financial statements for the period ended on March 31, 2014, prepared in accordance with the International Financial Reporting Standards (IFRS), together with the independent auditor's report and the statement of income and expenditures as of March 31, 2014.

 http://www.rns-pdf.londonstockexchange.com/rns/1509H_-2014-5-14.pdf

CHAIRMAN of the GENERAL DIRECTOR,

BOARD OF DIRECTORS, Virgil Marius Metea

Aurora Negrut

ECONOMIC DIRECTOR,

Lucia Ionascu

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Virgil Metea Lucia Ionascu

General Manager Economic Director