Rosneft: Financial Results for III Quarterly and 9 Months. 2020 year
Financial performance
Sales and income from associates and joint ventures
In the III quarter. 2020 revenues and income from associates and joint ventures amounted to RUB 1,439 billion. ($ 20.1 billion). Increase in revenue in ruble terms relative to Q2 2020 (+ 38.5%) due to the recovery of world oil prices (+ 37.8%) amid a reduction in production under the new OPEC + Agreement, as well as an increase in sales of petroleum products in the domestic market (+ 28.8%) …
Revenue for 9 months 2020 decreased by 34.2% compared to 9 months. 2019 mainly as a result of a decrease in world oil prices (-36.4%) and a decrease in oil sales (-17.8%) due to a drop in demand in the global market due to the COVID-19 pandemic.
Consolidated financial results under IFRS for the III quarter. 2020 and 9 months 2020:
| III quarter. 2020 | II quarter. 20 20 | % of | 9 months 2020 | 9 months 2019 | % of | |
|---|---|---|---|---|---|---|
| RUB bln (with the exception of %) | ||||||
| Sales and income from associates and joint ventures | 1439 | 1,039 | 38.5% | 4243 | 6452 | (34.2)% |
| EBITDA | 366 | 170 | > 100% | 845 | 1617 | (47.7)% |
| EBITDA margin | 24.7% | 15.8% | 8.9 p.p. | 19.4% | 24.7% | (5.3) p.p. |
| Net income attributable to Rosneft shareholders | (64) | 43 | – | (177) | 550 | – |
| Net profit margin | (4.4)% | 4.1% | (8.5) p.p. | (4.2)% | 8.5% | (12.7) p.p. |
| Capital expenditures | 202 | 182 | 11.0% | 569 | 634 | (10.3)% |
| Free cash flow (RUB equivalent) 1 | 146 | (13) | – | 352 | 659 | (46.6)% |
| Operating costs, RUB / boe | 205 | 208 | (1.4)% | 201 | 200 | 0.5% |
| USD bln 2 (excluding%) | ||||||
| Sales and income from associates and joint ventures | 20.1 | 14.9 | 34.9% | 62.6 | 100.6 | (37.8)% |
| EBITDA | 5.0 | 2.5 | 100% | 12.4 | 24.8 | (50.0)% |
| Net income attributable to Rosneft shareholders | (0.8) | 0.7 | – | (2.1) | 8.5 | – |
| Capital expenditures | 2.7 | 2.5 | 8.0% | 8.0 | 9,7 | (17.5)% |
| Free cash flow | 2.0 | (0.1) | – | 5.4 | 10.0 | (46.0)% |
| Operating costs, USD / boe | 2.8 | 2.9 | (3.4)% | 2.8 | 3.1 | (9.7)% |
| For reference | ||||||
| Average Urals price, USD / bbl | 43.0 | 31.2 | 37.8% | 40.8 | 64.1 | (36.4)% |
| Average Urals price, thousand rubles / bbl | 3.17 | 2.26 | 40.1% | 2.89 | 4.17 | (30.8)% |
1 The calculation includes interest for the use of cash received under long-term contracts for the supply of oil and oil products. Prior periods have been adjusted for comparability on a net change in the operations of subsidiary banks in the operating flow.
2 Average monthly rates of the Central Bank of the Russian Federation were used for conversion.
Commenting on the Company’s financial results for the III quarter. 2020, Chairman of the Management Board and Chief Executive Officer of Rosneft, I.I. Sechin said:
“During the reporting period, the Company demonstrated its ability to successfully operate under difficult conditions of oil production restrictions and relatively low prices for hydrocarbons. EBITDA for the third quarter of 2020 not only more than doubled the level of the second quarter, but also exceeded the level of the first quarter, when the macroeconomic environment was not yet under the influence of coronavirus restrictions. Among the significant achievements of the reporting period were the reduction in hydrocarbon production costs to $ 2.8 per barrel of oil equivalent and a 24% year-on-year decrease in interest expenses in dollar terms. Management will continue to work to further improve efficiency in all areas of the Company.
Over the nine months of this year, Rosneft generated free cash flow in the amount of 352 billion rubles or 5.4 billion US dollars, which allowed us not only to fully fulfill our obligations to shareholders to pay dividends for 2019, but also to continue reducing debt. So, since the beginning of the year, the amount of financial debt and trade prepayments has been reduced by $ 5.7 billion. At the same time, the debt structure continued to improve with an increase in its long-term portion from 76% to 83%.
We hope that the market will positively perceive the Company’s ability to reduce the absolute size of debt and prepayments, as well as maintain a high level of financial stability in difficult macroeconomic conditions. “
EBITDA
In the III quarter. 2020 EBITDA amounted to 366 billion rubles. (5.0 billion dollars), having doubled in ruble terms compared to the II quarter. 2020 EBITDA increased primarily due to the recovery in oil prices (+ 37.8%), as well as a reduction in the negative impact of the reverse excise tax.
Decrease in EBITDA versus 9 months 2019 was caused by a significant decrease in world oil prices (-36.4%) amid falling demand for oil in the world market, a decrease in oil sales and the negative impact of the reverse excise tax (-223 billion rubles), which was partially offset by a decrease in administrative expenses by 5.3%.
Unit operating costs for production in the III quarter. 2020 amounted to 205 rubles / boe. Decrease to the level of II quarter. 2020 is driven by a reduction in energy costs and the volume of well servicing and workover operations amid limited production under the new OPEC + Agreement. Unit operating costs in USD terms amounted to USD 2.8 / boe, decreasing by 3.4% compared to Q2. Feb 2020
Unit operating costs for 9 months 2020 amounted to 201 rubles / boe. ($ 2.8 / boe), slightly changed from 9M 2019, amid production restrictions under the new OPEC + Agreement.
Net profit / (loss) of shareholders of the Company
In the III quarter. In 2020, the net profit amounted to -64 billion rubles. (-0.8 billion dollars), taking into account the negative effect of non-monetary factors.
For 9 months. In 2020, the net profit amounted to -177 billion rubles. (-2.1 billion dollars). The decrease relative to the same period in 2019 was caused by the negative impact of market fluctuations associated with the COVID-19 pandemic, as well as the negative effect of non-monetary factors.
Capital expenditures
For 9 months. 2020 capital investments amounted to 569 billion rubles. (8.0 billion dollars), having decreased by 10.3% as compared to 9 months. 2019 Specific capital expenditures in the Exploration and Production segment for 9 months 2020 amounted to 5.4 USD / boe, having decreased by 10% yoy. The decrease was due to the revision of the Company’s investment program in the face of negative conditions on world markets and new agreements to limit oil production, reached in April 2020.
Free cash flow
In the III quarter. 2020 free cash flow amounted to 146 billion rubles. ($ 2.0 billion), which is associated with positive EBITDA dynamics, taking into account the growth in oil prices.
Free cash flow for 9 months 2020 amounted to 352 billion rubles. ($ 5.4 billion). The decrease in free cash flow compared to the same period last year was due to a decrease in EBITDA, which was partially offset by a decrease in capital expenditures.
Financial stability
For 9 months. By 2020, the amount of financial debt and trade liabilities decreased by $ 5.7 billion. The decrease in interest expenses in dollar terms was 24% compared to 9 months. 2019 Net debt / EBITDA in dollar terms at the end of the reporting period was 2.5x. For the III quarter. the share of the short-term portion of financial debt was reduced from 24% to 17%. At the end of the reporting quarter, the amount of liquid financial assets and the available volume of credit lines exceeded the short-term part of the financial debt by 1.8 times.
