3rd Quarter Results

IDENTIFICATION DETAILS ON REPORT AND ISSUER

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

Report date: November 12, 2014Name of the Company: SNGN ROMGAZ SA

Headquarter: Medias, P-ta Constantin I. Motas, Nr.4, code 551130Telephone/fax 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

Regulated markets where the issued securities are traded: Bucharest Stock Exchange (BVB), London Stock Exchange (LSE)

THIRD QUARTER REPORT

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

REGARDING THE ECONOMIC-FINANCIAL ACTIVITY OF

SNGN ROMGAZ SA AS OF September 30, 2014

(January 01, 2014 - September 30, 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.

The nine months year to date reflect a strong operating and financial performance of the company. A summary of the main indicators is described below:

· EBITDA increased in the first nine months of 2014 by 29.98% as compared to the same period of 2013 (T3 2014: thousand LEI 1,917,743; T3 2013: thousand LEI 1,475,459);

· EPS (net profit/share) is LEI 2.89/share;

· E&P (exploration, production): Production of natural gas recorded in the first three quarters of 2014 recorded a value of 4 227.9 million cubic meters, representing an increase of 0.71% of the production recorded in the same period of 2013, namely 4 198.0 million cubic meters;

· Capital Expenditure amounted million LEI 751, representing an increase of 28.73% as compared to the level achieved during the same period of 2013 (million LEI 582.6);

· Revenues from the underground storage activity increased by million LEI 80.3, namely by 35.42% as compared to the same period of 2013 due to the implementation of new underground storage tariffs starting from April 30th 2013, in accordance with ANRE Order No. 26/2013;

· Revenues obtained from the electric power sector were in amount of million LEI 242.9 in the nine month period ended September 30, 2014, as compared with the similar period of prior year of million LEI 98.1;

· All investment expenses and the working capital have been financed by internal resources.

ORGANIZATIONAL STRUCTURE

The Company currently operates through seven branches:

· Natural Gas Production Branch - Medias;

· Natural Gas Production Branch - Targu Mures;

· Natural Gas Underground Storage Branch - Ploiesti;

· Interventions, Capital Repairs and Special Operations on Wells Branch - Medias (SIRCOSS);

· Technological Transport and Maintenance Branch - Targu Mures (STTM);

· Bratislava Branch;

· Electricity Production Branch - Iernut.

SHAREHOLDER STRUCTURE

The Shareholders' structure as of September 30, 2014 is as follows:

Between June 18 and 23, 2014, SC "Fondul Proprietatea" SA sold a total number of shares of 19,243,000 both on Bucharest Stock Exchange (as shares) and on London Stock Exchange (as GDRs). Following such transaction, SC "Fondul Proprietatea" SA continues to be an important shareholder, holding more than 10% of SNGN Romgaz SA's share capital.

BOARD OF DIRECTORS STRUCTURE MODIFICATION

On June 13, 2014, by Resolution No. 4 of the Ordinary General Meeting of Shareholders, Mr. Dumitru Chisalita was appointed as Director of SNGN Romgaz SA for a mandate valid until May14, 2017. Mister Dumitru Chisalita was appointed for the vacancy following the resignation of Mister Eugen Dragos Doros.

By Resolution No. 6/July 30, 2014 of the Ordinary General Meeting of Shareholders, Mr. Sergiu Cristian Manea was appointed as Director of SNGN Romgaz SA for a mandate valid until May 14, 2017. Mr. Sergiu Cristian Manea was appointed for the vacancy following the resignation of Mister Adrian Constantin Volintiru.

Following the above mentioned modifications, the structure of the Board of Directors on the date of this report is as follows:

· Aurora Negrut;

· Virgil Marius Metea;

· Dumitru Chisalita;

· Ecaterina Popescu;

· Petrus Antonius Maria Jansen ;

· David Harris Klingensmith;

· Sergiu Cristian Manea.

PHYSICAL INDICATORS

The natural gas quantities produced, supplied, injected/ extracted into/from the underground storages (UGS) between January-September 2014, compared to the same period last year, are described in the table below:

*Million cubic meter*

*) it does not include the gas delivered to SPEE Iernut

As compared to the previous year, gas production (extraction, deliveries) was higher. The extracted quantity was higher by 0.71% and the delivered production (including joint ventures) increased by 7,65% due to higher demand, which also required higher quantity of gas extracted from underground gas storages.

The quantity delivered to SPEE Iernut was higher than last year, considering the idle period from February 1, 2013 to May 1, 2013 when no electricity was delivered. The electricity delivered during the reporting period increased by 121.18% as compared to the previous year.

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 EU 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 not been audited by the independent auditor of the Company.

The Company's 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 September 30, 2014, as compared to the indicators referring to the same period of 2013 are described in the table below:

Summary of interim individual statement of comprehensive income as of September 30, 2014

Revenue

For the first three quarters of 2014, SNGN Romgaz SA generated revenue of thousand LEI 3,286,770 compared to thousand LEI 2,587,049 generated for the similar period of 2013, resulting in increase of the revenue by 27.05%.

The highest share of the revenue was generated by the revenue from sale of internal production.

Detailed Breakdown of Revenue

The analysis by factors of the revenue from sale of internal production during the analysed period as compared to the revenue of the same period of 2013 is shown below:

The revenue from sale of internal production for the period January - September 2014, as compared to the same period of 2013 was higher by thousand LEI 717,984. The influences by factors are the following:

- higher production sale by 7.65% which resulted in higher revenues from sale of internal production by thousand LEI 142,765. The increase of gas delivery was generated by higher demand of beneficiaries for the scope of consumption or trading on the gas market.

- gas sale at a higher average price by 28.63% than in 2013, which had a positive influence on revenue increase from sale of internal production by thousand LEI 575,218.1.

Revenue from underground gas storage services was highly influenced by the changes of applied underground storage tariffs starting from April 30 2013, as shown in the table below:

Import gas delivery volumes decreased during the first three quarters of 2014 compared to the same period of last year by 69.36%, as shown in the "Detailed Breakdown of Revenue" table from above, and these revenue decreased by 70.59% as compared to the similar period of 2013. The reduction in import gas delivery volumes is due 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 three quarters of 2014 by thousand LEI 144,839 as compared to 2013.

Cost of Commodities Sold

For the nine months ended September 30, 2014, as compared to the same period of 2013, cost of commodities sold decreased from thousand LEI 337,510 to thousand LEI 154,940, respectively with 55.09%, mainly due to a reduction in sales of imported natural gas, and to the increase related to acquisition of electric power services sold to Romgaz clients.

Investment Income

For the reporting period the investment income decreased by 30.75%, as a result of interest rate revenue decrease, driven by the reduction of interest rates of the cash placed in state bonds and term deposits.

Other Revenues and Losses

During the first three quarters of 2014 the Company recorded a loss of thousand LEI 195.600 due to an impairment of receivables of thousand LEI 179,144, out of which the highest value is the impairment of Electrocentrale Galati receivable of thousand LEI 131,991, followed by the adjustment of Interagro receivable, in amount of thousand LEI 47,962. At the end of the reporting period, the total adjustment for Electrocentrale Galati and Interagro is thousand LEI 176,658, and thousand LEI 261,072, respectively. The net favorable amount of the impairment reversal for the other clients is thousand LEI 809. The insolvency procedure for the client Eletrocentrale Galati was opened, by Civil Court Decision no. 603/16.06.2014 issued by the Galati Court.

Changes in Inventory

The difference between the cost of gas injected in UGSs and the cost of gas extracted from UGSs was higher in the first nine months of 2013 as compared to the same period of 2014.

Depreciation and Amortization

In the nine months ended 30 September 2014, depreciation, amortization and impairment expense decreased by 5.52% from thousand LEI 601,746 (September 2013) to thousand LEI 568,506 (September 2014). This decrease was due to decrease of fixed assets and intangible assets depreciation and amortization by thousand LEI 121,940, and increase of their impairment by the amount of thousand LEI 88,700.

Employee Benefit Expense

For the reporting period the employee benefit expenses of thousand LEI 323,624 (where the capitalized costs of thousand LEI 79,947 are added) have increased as compared to the same period of the previous year by 4.04% mainly due to the increase in number of employees following the takeover of CTE Iernut on February 1st, 2013.

Exploration expense

For the reporting period ended September 30, 2014 the exploration expenses decreased by 15.41% compared to the period ended September 30, 2013, due to a lower value of approval to abandon exploration projects.

Other Expenses

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

"Other expenses" recorded an increase of 88.93% as of September 30, 2014, from thousand LEI 397,707 to thousand LEI 751,371. 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 thousand LEI 67,141. This tax was introduced in 2014, by Government Order no. 102/2013 for the modification and completion of Law 571/2003 regarding the Fiscal Code and for the regulation of certain financial-fiscal measures;

- 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 thousand LEI 179,121.

"Net provision expenses" of thousand LEI (20,931) recorded in the nine-month period ended September 30, 2014 reflect the net movement of provisions during the year. In 2014, the provision for greenhouse gas emission certificates of thousand LEI 10,158 recorded as of December 31, 2013 was reversed, as the Company acquired the needed certificates. Also, in the net provision expenses is included the effect of the change in the decommissioning provision of thousand LEI (10,964). The net change in other provisions is of thousand LEI 191. In the similar period of 2013, the Company recorded a net provision expense of thousand LEI 8,171, of which thousand LEI 5,438 related to greenhouse gas emission certificates. As of September 30, 2014 the Company does not need to acquire additional certificates.

The internal electric power expenses decreased in the first nine months of 2014 as compared to the similar period of the previous year due to covering the largest part of own electric power consumption from SPEE Iernut.

Other income

In the nine months ended on September 30, 2014, the other income increased by thousand LEI 57,165, increase due to penalties applied to the clients who did not pay in due term the gas purchased from Romgaz.

Income tax expense

As of September 30, 2014, the Company recorded current income tax expense in amount of thousand LEI 301,794 as compared to current income tax expense of thousand LEI 216,467 for the nine months period ended September 30, 2013.The difference up to the income tax value is the deferred income tax of thousand LEI 8,545 in the nine-month period ended September 30, 2014 (nine-month period ended September 30, 2013 - thousand LEI 55,873). The current income tax expense increase is mainly due to the increase of gross results during the first nine months of 2014, compared to the same period of last year.

Profit for the year

In the first three quarters of 2014, the Company's net profit increased by thousand LEI 317,103 (39.79%) from thousand LEI 796,890 to thousand LEI 1,113,993, due to increase of revenue by higher percentage than the increase of expenses.

 Summary of Statement of individual financial position as of September 30, 2014:

 Non-current assets

The total non-current assets increased by 1.89%, i.e. thousand LEI 118,139. The increase is mainly due to procurement of tangible assets used especially in gas exploration, appraisal and production activity.

Other intangible assets

Other intangible assets decreased by thousand LEI 35,864 in the nine months period ended September 30, 2014, as compared to December 31, 2013, due to adjustments for impairment of intangible assets in progress.

Current assets

Current assets decreased by 7.89% due to decrease of trade receivables.

Inventories

The decrease by 12.32% (thousand LEI 57,165) at the end of the reporting period, is due to the decrease of the gas stock as a result of increased deliveries of gas from current internal production both to Romgaz clients and to SPEE Iernut, and the decrease of purchased import gas quantities.

Trade receivables and other receivables

Trade receivables and other receivables decreased by thousand LEI 639,132 as compared to December 31, 2013, due to increase of adjustments for doubtful clients and to reduction of accounts receivable balance as a result of lower gas consumption during the summer months compared to winter months.

Cash and cash balances. Other short term financial assets

Cash, cash equivalent and other short term financial assets increased during the reporting period from thousand LEI 2,534,254 (December 31, 2013) to thousand LEI 2,880,198 at the end of September 2014. This is due to increased value of delivered and received gas production.

Equity

Share capital

Following the Resolution of GMS of April 28, 2014 and provisions of OMFP 1690/2012 and OMFP 213/2013 for the change of OMFP 1286/2012, the adjustment for hyperinflation was transferred to the retained earnings.

Retained earnings

Retained earnings increased mainly by the value of net profit made in the first nine months of 2014 and by the transfer of the account "Share-capital adjustments" to the "Retained Earnings" account. In 2014 was decided the allocation of dividends in amount of thousand LEI 990,637.

Non-current liabilities

Decrease of non-current liabilities by 1.94% is due to the decrease of deferred tax liabilities.

Current liabilities

Current liabilities decreased by 43.41% due to decrease of current tax liability and decrease of VAT obligations.

Trade and other payables

The decrease by 41.15% is mainly due to the fact that the beneficiaries of gas delivered by the Company made lower advance payments as compared to December 31, 2013.

Current tax liabilities

Current tax liabilities decreased by thousand LEI 131,520 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, and the provision was reversed.

Other liabilities

The VAT that is due decreased by 33.21% due to decrease of revenue from delivery of gas in September 2014 as compared to December 2013.

Statement of interim individual cash flows as of September 30, 2014 (thousand LEI)

 Statement of cash flows presented above presents the cash flows for January - September 2014 compared with the similar period of 2013, classified by type of activity: operating, investing and financing. Company's Statement of cash flows is prepared using the indirect method, whereby net profit is adjusted for the effects of transactions of non-cash nature, any deferrals or accruals of cash payments or receipts from operations, past or future, and items of income or expense associated with the cash flows from investing or financing.

Reconciliation of profit before taxation to cash flow generated from operating activities (before changes in net current assets) resulted in a net upward adjustment of thousand LEI 713,441 for January - September 2014 compared to thousand LEI 607,548 in January - September 2013.

The most important movements in cash flows were the receipts for gas delivered to the clients of the Company, payments for acquisition of non-current assets (thousand LEI 254,271) and exploration assets in amount of thousand LEI 469,458, as per the investment plans approved by the Company. Dividends paid to shareholders during the first nine months of 2014, amount to thousand LEI 986,550, as compared to thousand LEI 1,060,115 paid during the same period of previous year.

INDICATORS 

In the nine-month period ended September 30, 2014, current liquidity decreased compared with the similar period of previous year due to a higher increase in current liabilities than that of current assets.

Between January-September 2014, SNGN ROMGAZ SA fulfilled all its financial obligations. At the same time, there isn't any risk factor to impact the Company's liquidity.

Attached hereto are the individual interim financial statements for the period ended on September 30, 2014, prepared in accordance with the International Financial Reporting Standards (IFRS), and the statement of income and expenditures as of September 30, 2014.

  http://www.rns-pdf.londonstockexchange.com/rns/8840W_-2014-11-12.pdf

CHAIRMAN of the GENERAL DIRECTOR,

BOARD OF DIRECTORS, Virgil Marius Metea

Aurora Negrut

ECONOMIC DIRECTOR,

Lucia Ionascu