29 Apr 2020 12:00
FOR IMMEDIATE RELEASE
NOVATEK Announces Consolidated IFRS Resultsfor the First Quarter 2020
Moscow, 29 April 2020. PAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three months ended 31 March 2020 prepared in accordance with International Financial Reporting Standards ("IFRS").
IFRS Financial Highlights(in millions of Russian roubles except as stated)
1Q 2020 | 1Q 2019 | |
Oil and gas sales | 182,595 | 231,184 |
Other revenues | 1,967 | 2,922 |
Total revenues | 184,562 | 234,106 |
Operating expenses | (146,535) | (175,140) |
Net gain on disposal of interests in subsidiaries | - | 308,578 |
Other operating income (loss) | (33,236) | (914) |
Normalized profit from operations* | 38,901 | 58,052 |
Normalized EBITDA of subsidiaries* | 45,383 | 65,724 |
Normalized EBITDA including share in EBITDA of joint ventures* | 100,668 | 117,942 |
Finance income (expense) | 141,453 | (6,021) |
Share of profit (loss) of joint ventures, net of income tax | (145,231) | 70,973 |
Profit before income tax | 1,013 | 431,582 |
Profit (loss) attributable to shareholders of PAO NOVATEK | (30,680) | 381,796 |
Normalized profit attributable toshareholders of PAO NOVATEK*,excluding the effect of foreign exchange gains (losses) | 53,547 | 65,730 |
Normalized basic and diluted earnings per share*,excluding the effect of foreign exchange gains (losses)(in Russian roubles) | 17.80 | 21.82 |
Cash used for capital expenditures | 41,143 | 42,476 |
* Excluding the effects from disposal of interests in subsidiaries and joint ventures (recognition of a net gain on disposal and subsequent non-cash revaluation of contingent consideration).
COVID-19 and Macro-Economic Environment
Global markets have experienced financial and economic disruptions caused by the spread of COVID-19, and the mandated shutdowns by many governments. This negative economic impact has lowered demand for crude oil, natural gas and oil products, which combined with the increase in the supply of crude oil due to the cancellation of the OPEC+ production agreement in the first quarter 2020, resulted in a decline in global hydrocarbon commodity prices. As of 31 March 2020, the Russian rouble significantly depreciated relative to the US dollar and the Euro that resulted in the recognition of substantial foreign exchange effects on foreign currency denominated loans by the Group's subsidiaries and joint ventures. Many of these events are out of the control of the Group's management.
Despite the economic instability on the global markets, the Group continues to achieve strong operating results and implement its main investment projects in accordance with the Group's approved corporate strategy. The Group's management continues to assess the current situation and present macro-economic environment and take appropriate actions if deemed necessary.
Revenues and EBITDA
Our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, decreased to RR 184.6 billion and RR 100.7 billion, or by 21.2% and 14.6%, respectively, as compared to the corresponding period in 2019.
The decreases in total revenues and Normalized EBITDA were largely due to a decline in world prices for hydrocarbons. Our revenues also decreased due to a decrease in LNG sales volumes on international markets resulted from an increase in the share of our joint venture OAO Yamal LNG direct sales under long-term contracts and a respective decrease in our spot LNG volumes purchased from Yamal LNG.
Profit (loss) attributable to shareholders of PAO NOVATEK
In the first quarter 2020, we recorded a loss attributable to shareholders of PAO NOVATEK in the amount of RR 30.7 billion (RR 10.20 per share) as compared to a profit of RR 381.8 billion in the corresponding period in 2019.
The Group's financial results in the current reporting period were significantly impacted by the unfavorable macroeconomic conditions noted above, which resulted in a decrease in our hydrocarbons sales prices and a recognition of substantial foreign exchange effects. Moreover, in both reporting periods, we recorded effects from the disposal of interests in the Arctic LNG 2 project by recognizing RR 308.6 billion of gain from the disposal of a 10% participation interest in the Arctic LNG 2 project in the first quarter 2019, and recognizing RR 34.1 billion of loss in the first quarter 2020 related to the subsequent non-cash revaluation of contingent consideration on the sale of a 40% participation interest in 2019.
Excluding the effects from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange differences, Normalized profit attributable to shareholders of PAO NOVATEK amounted to RR 53.5 billion (RR 17.80 per share), representing a decrease of 18.5% as compared to the first quarter 2019.
Cash used for capital expenditures
Our cash used for capital expenditures aggregated RR 41.1 billion as compared to RR 42.5 billion in the corresponding period in 2019. A significant portion of our capital expenditures was attributable to the ongoing developments of our LNG projects (the LNG construction center located in the Murmansk region, the Obskiy LNG project and the Arctic LNG 2 project prior to March 2019). In addition, we invested capital in the ongoing development of the North-Russkoye and Beregovoye fields, the preparation for production commencement at our new fields (the West-Yurkharovskoye and East-Tazovskoye), development of crude oil deposits of the East-Tarkosalinskoye and Yarudeyskoye fields, and exploratory drilling.
Hydrocarbon Production Volumes
1Q 2020 | 1Q 2019 | |
Total hydrocarbon production, million barrels of oil equivalent (million boe) | 150.2 | 147.1 |
Total production (million boe per day) | 1.65 | 1.63 |
Natural gas production including proportionate share in the production of joint ventures, million cubic meters (mmcm) | 19,079 | 18,660 |
Natural gas production by subsidiaries | 9,774 | 10,099 |
Group's proportionate sharein the natural gas production of joint ventures | 9,305 | 8,561 |
Liquids production including proportionate share in the production of joint ventures, thousand tons (mt) | 3,048 | 2,987 |
Liquids production by subsidiaries | 1,571 | 1,600 |
Group's proportionate share in the liquids production of joint ventures | 1,477 | 1,387 |
Our total natural gas production including our proportionate share in the production of joint ventures increased by 2.2% as compared to the corresponding period in 2019. The main factors were the launch of the North-Russkoye field at the end of 2019 and an increase in hydrocarbon production from the Achimov horizons at the Arcticgas's Urengoyskoye field due to the expansion of the gas condensate treatment facility in the current period.
Our total liquids production including our proportionate share in the production of joint ventures increased by 2.0% compared to the corresponding period in 2019 due to an increase in the production at Arcticgas (see above), as well as the commissioning of new wells at the Beregovoye field.
Hydrocarbon Sales Volumes
1Q 2020 | 1Q 2019 | |
Natural gas (mmcm) | 20,686 | 22,195 |
including: |
|
|
Sales in the Russian Federation | 18,236 | 18,774 |
Sales on international markets | 2,450 | 3,421 |
Liquids (mt) | 4,003 | 3,976 |
including: | ||
Stable gas condensate refined products | 1,696 | 1,797 |
Crude oil | 1,164 | 1,127 |
Liquefied petroleum gas | 724 | 677 |
Stable gas condensate | 414 | 372 |
Other oil products | 5 | 3 |
Our natural gas sales volumes totaled 20.7 billion cubic meters (bcm), representing a decrease of 6.8% as compared to the corresponding period in 2019. The decrease was mainly due to a decrease in LNG sales volumes purchased mainly from our joint venture OAO Yamal LNG, as a result of an increase in the share of Yamal LNG's direct LNG sales under long-term contracts and the respective decrease in LNG spot sales to shareholders, including the Group. Our natural gas volumes sold on the domestic market decreased by 0.5 bcm, or 2.9%, as a result of the lower demand from end-customers due to warmer winter weather conditions.
As at 31 March 2020, we recorded 0.3 bcm of natural gas in inventory balances compared to 0.8 bcm at 31 March 2019. Natural gas inventory balances fluctuate period on period and depend on the Group's demand for natural gas withdrawals for the sale in subsequent periods.
Our liquid hydrocarbons sales volumes totaled 4.0 million tons, representing a marginal increase of 0.7% as compared to the corresponding period in 2019. As at 31 March 2020, we recorded 824 thousand tons (mt) of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 1,007 mt at 31 March 2019. Our liquid hydrocarbon inventory balances tend to fluctuate period on period and are usually realized as sales in the following reporting period.
Selected Items of Consolidated Statement of Financial Position
(in millions of Russian roubles)
31 March 2020 | 31 December 2019 | |
ASSETS | ||
Non-current assets | 1,495,616 | 1,516,371 |
Property, plant and equipment | 595,933 | 556,798 |
Investments in joint ventures | 438,699 | 585,340 |
Long-term loans and receivables | 319,549 | 231,898 |
Current assets | 548,658 | 496,496 |
Total assets | 2,044,274 | 2,012,867 |
LIABILITIES AND EQUITY | ||
Non-current liabilities | 223,253 | 228,678 |
Long-term debt | 133,944 | 139,852 |
Current liabilities | 197,197 | 117,113 |
Total liabilities | 420,450 | 345,791 |
Equity attributable toPAO NOVATEK shareholders
| 1,605,501 | 1,647,509 |
Non-controlling interest | 18,323 | 19,567 |
Total equity | 1,623,824 | 1,667,076 |
Total liabilities and equity | 2,044,274 | 2,012,867 |
The full set of consolidated interim condensed IFRS financial statements, the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations are available on the Company's web site (www.novatek.ru).
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For further information, please visit www.novatek.ru or contact:
Press Service+7 (495) 721 2207press@novatek.ru | Investor Relations+7 (495) 730 6013IR@novatek.ru |
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PAO NOVATEK is the largest independent natural gas producer in Russia, and in 2017, entered the global LNG market by successfully launching the Yamal LNG project. Founded in 1994, the Company is engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons. Upstream activities of the Company's subsidiaries and joint ventures are concentrated mainly in the prolific Yamal-Nenets Autonomous Region, which is the world's largest natural gas producing area and accounts for approximately 80% of Russia's natural gas production and approximately 15% of the world's gas production. NOVATEK is a public joint stock company established under the laws of the Russian Federation. The Company's shares are listed in Russia on Moscow Exchange (MOEX) and the London Stock Exchange (LSE) under the ticker symbol «NVTK».