7 Aug 2018 08:07
Financial results for 2Q and 1H 2018
· 2Q 2018 EBITDA growth by 46.8% up to RUB 565 bln with EBITDA margin improving to 26.9%
· 2Q 2018 Net Income jumped by more than 2.8 times QoQ up to RUB 228 bln,1H 2018 Net Income is 1.4 times higher than 2017 level
· Free Cash Flow improvement in 2Q 2018 by more than 1.5 times QoQ up to RUB 221 bln, 1H 2018 Free Cash Flow doubled YoY up to RUB 363 bln
· Net Debt/EBITDA was down by 26% since the beginning of 2018 to 1.5x
Consolidated IFRS financial results for 2Q and 1H 2018:
| 2Q 2018 | 1Q 2018 | Change, % | 1H 2018 | 1H 2017 | 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 | 2,065 | 1,722 | 19.9% | 3,787 | 2,809 | 34.8% |
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EBITDA | 565 | 385 | 46.8% | 950 | 639 | 48.7% |
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EBITDA margin | 26.9% | 21.9% | 5.0 p.p. | 24.6% | 22.0% | 2.6 p.p. |
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Net income attributable to Rosneft shareholders | 228 | 81 | >100% | 309 | 751 | >100% |
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Net income margin | 11.0% | 4.7% | 6.3 p.p. | 8.2% | 2.7% | 5.5 p.p. |
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Capital expenditures | 229 | 223 | 2.7% | 452 | 407 | 11.1% |
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Free cash flow (RUB equivalent)2 | 221 | 142 | 55.6% | 363 | 178 | >100% |
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Upstream operating expenses RUB/boe | 192 | 185 | 3.8% | 189 | 176 | 7.4% |
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USD bln3 (except %) |
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Revenues and equity share in profits of associates and joint ventures | 33.9 | 30.9 | 9.7% | 64.8 | 50.1 | 29.3% |
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EBITDA | 9.1 | 6.8 | 33.8% | 15.9 | 11.0 | 44.5% |
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Net income attributable to Rosneft shareholders | 3.6 | 1.5 | >100% | 5.1 | 1.3 | >100% |
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Capital expenditures | 3.7 | 3.9 | (5.1)% | 7.6 | 7.0 | 8.6% |
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Free cash flow | 3.6 | 2.5 | 44.0% | 6.1 | 2.9 | >100% |
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Upstream operating expenses USD/boe | 3.1 | 3.3 | (6.1)% | 3.2 | 3.0 | 6.7% |
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For reference |
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Average Urals price, USD per bbl | 72.5 | 65.2 | 11.1% | 68.9 | 50.5 | 36.3% |
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Average Urals price, th. RUB per bbl | 4.48 | 3.71 | 20.7% | 4.09 | 2.93 | 39.5% |
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1 Net income in 1H 2017 is adjusted due to recognition of the final purchase price allocation 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 for 1H 2017.
3Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.
Commenting the results for 2Q 2018, Rosneft Chairman of the Management Board and Chief Executive Officer Igor Sechin said:
"The second quarter was mainly a reflection of the management's efforts to improve the efficiency of the Company. On the back of significant improvement in macro conditions and robust cost control operating profit before depreciation, interest and taxes rose by more than 40% QoQ and by more than 80% YoY.
The key strategic acquisitions made in the period of low oil prices have been completed. The Company focuses on organic growth and monetization of synergies from the acquisitions.
In May 2018 the Company announced a set of initiatives to enhance shareholder value, including reduction of total debt and trading liabilities at least by RUB 500 bln this year and implementation of buy-back program.
We are actively working on the set initiatives to enhance shareholders returns. In the first half-year the Company more than halved its short-term financial liabilities. The Board of Directors approved detailed buy-back program. The management keeps maintaining the intensive work with the intention to meet the goals set for the year".
Financial performance
Revenues and equity share in profits of associates and joint ventures
2Q 2018 revenue amounted to RUB 2,065 bln (USD 33.9 bln) increasing by 19.9% QoQ, on the back of higher crude oil prices - 11.1% growth in USD terms and 20.7% increase in RUB terms.
In 1H 2018 revenue increased by 29.3% in USD terms YoY, mainly driven by market price improvement.
EBITDA
2Q 2018 EBITDA rose 1.5 times QoQ and reached RUB 565 bln (USD 9.1 bln). The significant QoQ EBITDA growth was achieved on the back of a significant increase in oil prices and a positive effect of export duty lag. The management's efforts, favorable price dynamics and increased equity share in profits of Russian and international projects (RUB 32 bln) contributed to 1H 2018 EBITDA growth up to RUB 950 bln.
Lifting costs were at 192 RUB/boe (or 3.1 USD/boe) in 2Q 2018 compared to 185 RUB/boe (or 3.3 USD/boe) in 1Q 2018. The cost dynamics is mainly explained by seasonality in upstream. 1H 2018 YoY increase in lifting costs (from 176 to 189 RUB/boe) was mainly driven by higher energy tariffs and increased repair and maintenance costs.
Net income attributable to Rosneft shareholders
2Q 2018 net income attributable to Rosneft shareholders jumped by 2.8 times QoQ and reached RUB 228 bln (USD 3.6 bln) on the back of operating income growth, FX impact and one-off gain from recognizing net income from the share acquisition in upstream JV with a foreign partner and recognition of fair value of previously held interest in JV.
In 1H 2018 net income attributable to Rosneft shareholders amounted to RUB 309 bln (USD 5.1 bln) exceeding 2017 level by 1.4 times, allowing for considerable growth in dividend base for interim 1H 2018 dividend payment.
Capital expenditures
Capital expenditures amounted to RUB 229 bln (USD 3.7 bln) in 2Q 2018 and RUB 452 bln (USD 7.6 bln) in 1H 2018. Its 9% growth (in USD terms) in 1H 2018 was driven by the development of Russian and international projects in accordance with the Company's business plan and strategy.
Free cash flow
1H 2018 free cash flow doubled YoY and reached RUB 363 bln (USD 6.1 bln) on the back of substantial EBITDA growth. In 2Q 2018 free cash flow amounted to RUB 221 bln (USD 3.6 bln).
Financial sustainability
Short-term financial liabilities dropped by 2.7 times (from USD 38.7 bln to USD 14.5 bln) due to scheduled repayments and partial refinancing with long-term instruments.
The Company's net debt level decreased by 12% in USD terms in 2Q 2018. Net debt/EBITDA was down by 26% since the beginning of 2018 to 1.5x as of the end of 2Q 2018.
Rosneft Information Division
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
August 7, 2018
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.