5 May 2017 08:00
Financial results for 1Q 2017
· Y/Y EBITDA growth by 22.0% in RUB terms and 54.1% in USD terms
· Threefold growth of FCF q/q
· Decrease in upstream costs per boe by 6.7% q/q
· Improved efficiency and realized synergies from Bashneft integration
· Planned capital expenditures growth by 24.7% y/y with sustainable free cash flow
Consolidated IFRS financial results for 1Q 2017:
| 1Q 2017 | 4Q 2016 | Change, % | 1Q 2017 | 1Q 2016 | Change, % |
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Financial results | RUB bln (except %) |
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Revenues and equity share in profits of associates and joint ventures | 1,410 | 1,485 | (5.1)% | 1,410 | 1,048 | 34.5% |
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EBITDA | 333 | 365 | (8.8)% | 333 | 273 | 22.0% |
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EBITDA margin | 22.8% | 24.0% | (1.2) p.p. | 22.8% | 25.2% | (2.4) p.p. |
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Net income attributable to Rosneft shareholders | 13 | 52 | (75.0)% | 13 | 12 | 8.3% |
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Net income margin | 0.9% | 3.5% | (2.6) p.p. | 0.9% | 1.1% | (0.2) p.p. |
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Capital expenditures | 192 | 234 | (17.9)% | 192 | 154 | 24.7% |
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Free cash flow (RUB equivalent) | 89 | 25 | >100% | 89 | 115 | (22.6)% |
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Upstream operating expenses RUB/boe | 168 | 180 | (6.7)% | 168 | 155 | 8.4% |
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| USD bln1 (except %) |
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Revenues and equity share in profits of associates and joint ventures | 24.8 | 24.1 | 2.9% | 24.8 | 14.5 | 71.0% |
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EBITDA | 5.7 | 5.8 | (1.7)% | 5.7 | 3.7 | 54.1% |
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Net income attributable to Rosneft shareholders | 0.2 | 0.8 | (75.0)% | 0.2 | 0.2 | - |
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Capital expenditures | 3.3 | 3.7 | (10.8)% | 3.3 | 2.1 | 57.1% |
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Free cash flow | 1.4 | 0.4 | >100% | 1.4 | 1.5 | (6.7)% |
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Upstream operating expenses USD/boe | 2.9 | 2.8 | 3.6% | 2.9 | 2.1 | 38.1% |
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For reference |
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Average Urals price, USD per bbl | 52.3 | 48.3 | 8.2% | 52.3 | 32.2 | 62.4% |
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Average Urals price, th. RUB per bbl | 3.07 | 3.05 | 0.9% | 3.07 | 2.40 | 28.1% |
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1Calculated using average monthly Central Bank of Russia exchange rates for the reporting period
Commenting the results for 1Q 2017, Rosneft Chief Executive Officer Igor Sechin said:
"The Company maintained industry leadership in investments pursuing monetization of unique reserves base and planned completion of large investment projects in near-term. Environment remains difficult: continuing world commodity markets volatility, rouble appreciation - all of this impacted the Company's financial results. At the same time, the Company's management takes all efforts to further improve efficiency and realize synergy effect from Bashneft integration. Undertaken measures let the Company maintain the operating profit in USD terms at the level of 4Q 2016 and increase it by more than 1.5 times y/y. The Company continues effective communication with the Government regarding investment drivers and schemes for realization of the Company's reserves base potential, and issues of sustainable financial model implementation for refining business. Taking into consideration new strategic acquisitions which synergy effect will be realized in near future the Company continues maintaining conservative level of financial leverage (net debt/EBITDA 1.56x) and stable cash flow generation."
Financial performance
Revenues and equity share in profits of associates and joint ventures
In 1Q 2017 revenues amounted to RUB 1,410 bln (USD 24.8 bln). Moderate decrease in revenues in rouble terms compared to 4Q 2016 was due to significant RUB appreciation and decline of crude oil export volumes in current external limitations. Revenues in USD terms increased by 2.9% q/q and in more than 1.5 times y/y.
EBITDA
In 1Q 2017 a positive effect of export duty lag decreased by RUB 17 bln vs. 4Q 2016. However, average oil price growth by 8.2%, 6.7% decrease in upstream operating expenses to RUB 168/boe on the background of planned optimization of expenses on equipment repair and maintenance, administrative expenses control and realization of synergies from acquisition of new assets contributed to maintaining EBITDA in USD terms (USD 5.7 bln) approximately at the level of 4Q 2016. However, EBITDA in RUB terms in 1Q 2017 decreased to RUB 333 bln due to significant negative impact of RUB appreciation.
On the background of RUB strengthening (7.2%) and increased MET rate (17.5%) EBITDA margin decline was only 1.2 p.p. q/q to 22.8%.
Improved macro conditions, increase in production, management efforts to control expenses and starting realization of synergy effect from the acquisition of new assets encouraged EBITDA growth by 22.0% y/y.
Net income attributable to Rosneft shareholders
Net income attributable to Rosneft shareholders amounted to RUB 13 bln in 1Q 2017 (+8.3% vs. 1Q 2016) in view of significant negative effect of foreign exchange rates due to RUB appreciation.
Capital expenditures
Taking into account the seasonality, capital expenditures decreased to RUB 192 bln (USD 3.3 bln) in 1Q 2017. Compared to 1Q 2016 capital expenditures increased by 24.7% in RUB terms (57.1% in USD terms) in accordance with the plan.
Free cash flow
In 1Q 2017 free cash flow exceeded RUB 89 bln (USD 1.4 bln) during significant decrease in impact of working capital changes resulted from crude oil and petroleum prices relative stabilization.
Net debt / EBITDA
As of the end of 1Q 2017 net debt / EBITDA ratio was at 1.56 in USD terms. Stable cash flow secured the fulfillment of planned payments on financial debt in 1Q 2017 and the Company's obligations amounted to RUB 50 bln on the mandatory offer for the acquisition of Bashneft ordinary shares from minority shareholders. The Company continues conservative liquidity management taking into consideration active stage of development of significant investment projects.
Rosneft Information Division
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
May 5, 2017
These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.