Rosneft: Financial Results for 1Q 2018
- Revenue growth by 22% to RUB 1.72 trln in 1Q 2018
- EBITDA increase by 15.6% up to RUB 385 bln in 1Q 2018
- Net income jumps by more than by 7 times to RUB 81 bln
- Considerable improvement in free cash flow to RUB 142 bln
- Short-term financial liabilities cut by 49%
Consolidated IFRS financial results for 1Q 2018:
| 1Q 2018 | 4Q 2017 | Change, % | 1Q 2018 | 1Q 2017 | Change, % |
| Financial results | RUB bln (except %) | |||||
| Revenues and equity share in profits of associates and joint ventures | 1,722 | 1,709 | 0.8% | 1,722 | 1,410 | 22.1% |
| EBITDA | 385 | 393 | (2.0)% | 385 | 333 | 15.6% |
| EBITDA margin | 21.9% | 22.4% | (0.5) p.p. | 21.9% | 22.8% | (0.9) p.p. |
| Net income attributable to Rosneft shareholders | 81 | 100 | (19.0)% | 81 | 111 | >100% |
| Net income margin | 4.7% | 5.9% | (1.2) p.p. | 4.7% | 0.8% | 3.9 p.p. |
| Capital expenditures | 223 | 292 | (23.6)% | 223 | 192 | 16.1% |
| Free cash flow (RUB equivalent)2 | 142 | 44 | >100% | 142 | 101 | 40.6% |
| Upstream operating expenses RUB/boe | 185 | 199 | (7.0)% | 185 | 168 | 10.1% |
USD bln3 (except %) | ||||||
| Revenues and equity share in profits of associates and joint ventures | 30.9 | 30.1 | 2.7% | 30.9 | 24.8 | 24.6% |
| EBITDA | 6.8 | 6.7 | 1.5% | 6.8 | 5.7 | 19.3% |
| Net income attributable to Rosneft shareholders | 1.5 | 1.8 | (16.7)% | 1.5 | 0.2 | >100% |
| Capital expenditures | 3.9 | 5.0 | (22.0)% | 3.9 | 3.3 | 18.2% |
| Free cash flow | 2.5 | 0.7 | >100% | 2.5 | 1.6 | 56.3% |
| Upstream operating expenses USD/boe | 3.3 | 3.4 | (2.9)% | 3.3 | 2.9 | 13.8% |
| For reference | ||||||
| Average Urals price, USD per bbl | 65.2 | 60.5 | 7.8% | 65.2 | 52.3 | 24.8% |
| Average Urals price, th. RUB per bbl | 3.71 | 3.53 | 5.0% | 3.71 | 3.07 | 20.7% |
1 Net income for 1Q 2017 is adjusted due to quarterly allocation of the final purchase price of Bashneft assets in 2017.
2The calculation includes interest expense on the prepayments on the long-term oil and petroleum products supply agreements. Revised data in the first quarter of 2017.
3Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.
Commenting the results for 1Q 2018, Rosneft Chairman of the Management Board and Chief Executive Officer Igor Sechin said:
“The Company demonstrated a significant improvement in 1Q 2018 financial results illustrated by free cash flow recovering to RUB 142 bln, or USD 2.5 bln, first of all. The Company cut the level of short-term financial liabilities by 49% this year, substantially improving the debt portfolio structure. Taking into account additional initiatives focused on shareholder value creation and also relatively favorable market conditions we expect further reduction in liabilities and improvement in the shareholder returns.”
Financial performance
Revenues and equity share in profits of associates and joint ventures
1Q 2018 revenue was up to RUB 1,722 bln (USD 30.9 bln), or by 0.8% QoQ, and by 22.1% to 1Q 2017, on the back of higher crude oil prices and optimization in sales channels despite the remaining constraints in production within the OPEC+ Agreement.
EBITDA
1Q 2018 EBITDA amounted to RUB 385 bln (USD 6.8 bln), remaining almost unchanged QoQ and rising by 15.6% to 1Q 2017. In favorable market environment the 1Q 2018 financial results were negatively impacted by an export duty lag.
Lifting costs were at 185 RUB/boe (or 3.3 USD/boe) in 1Q 2018 compared to 199 RUB/boe (or 3.4 USD/boe) in 4Q 2017. The improvement in operating costs was driven by lower energy expenses, seasonal cut in workovers and maintenance of pipelines and oil equipment and also corresponding decrease in consumption of materials and wages.
Net income attributable to Rosneft shareholders
Net income attributable to Rosneft shareholders reached RUB 81 bln in 1Q 2018, more than 7 times higher YoY thanks to the operating income growth and lower FX items. Decrease in the net income compared to the previous quarter is mainly caused by the recognition of the one-off income in 4Q 2017.
Capital expenditures
Capital expenditures were at RUB 223 bln (USD 3.9 bln) in 1Q 2018. The growth in comparison with 1Q 2017 is driven by high activity, according to approved business-plan, in the upstream projects, including capital investments in Kondaneft and Zohr.
Free cash flow
1Q 2018 free cash flow improved considerably to RUB 142 bln (USD 2.5 bln), or 3 times higher vs. 4Q 2017. The growth in free cash flow is mainly driven by lower capital expenditures and working capital.
Financial sustainability
The Company repaid RUB 1,027 bln (including interests) of financial liabilities in 1Q 2018. The short-term financial liabilities decreased by 49% through refinancing with the long-term loans and the scheduled maturity.
Dividends
On 25 April 2018, the Board of Directors recommended the payment of the final dividend of 6.65 RUB per share for 2017. After being approved at the Annual Shareholders’ Meeting and including semi-year dividends for 1H 2017 the final dividend amounts to 10.48 RUB per share which corresponds with 50% of IFRS net income payout.
