14 Aug 2020 07:55
OPERATING RESULTS FOR 2Q AND 1H 2020
· 1H 2020 LIQUIDS PRODUCTION AMOUNTED TO 4.34 MMBPD UNDER NEW OPEC+ AGREEMENT
· 1H 2020 GAS PRODUCTION CONSTITUED 31.8 BCM
· PROGRESS IN THE DEVELOPMENT OF THE KEY PRODUCTION ASSETS WITH EMPHASIS ON THE NEW TECHNOLOGIES IMPLEMENTATION
· 1H 2020 REFINING THROUGHPUT AT THE COMPANY'S REFINERIES INCREASED TO 52.7 MMT
· 2Q 2020 REFINING DEPTH INCREASED TO 75.2%, LIGHT PRODUCTS YIELD AMOUNTED TO 56.3%
ESG
In 1H 2020 the company made significant progress in the field of industrial safety: the PSER-1 metric, which reflects the frequency of industrial accidents, improved by c. 1.5 times to 0.048, which corresponds to the first quartile of international oil and gas companies.
Due to the accelerated implementation of measures aimed at preventing and eliminating gas, oil and water inflows in the course of hydrocarbon production, a high level of well blowout safety has been achieved. In particular, in 1H 2020 the rate of LOWC well control loss cases while drilling was 0.002.
People's health and safety are Rosneft's top priority. The Company has an integrated pandemic threat response system. As part of employees' regular testing, more than 270 th. tests were conducted. Over 16 mln units of personal protective equipment, 4.1 mln liters of disinfectant, over 600 th. liters of hand sanitizer were procured as of the end of June.
The products targeted at combating coronavirus are produced at the Company's own facilities and distributed on the domestic market. In particular, the Company produces ethyl alcohol and acetone (secondary antiseptic), which are used in disinfectant production. Since the beginning of the pandemic, 21.7 th. tons of acetone and 2.1 th. tons of ethyl alcohol have been sold in Russia.
Rosneft is actively introducing new remote communication forms which allow for the increase of corporate business processes efficiency, as well as the interaction with partner companies of the oil and gas industry. Strict compliance with sanitary and hygienic requirements, contactless payment service and building widespread awareness of the disease prevention methods ensure the safety of employees and customers of the corporate retail network.
Hydrocarbon production
1H 2020 liquids production amounted to 4.34 mmbpd (106.5 mmt), a 7.3% decrease YoY. 2Q 2020 liquids production constituted to 4.04 mmbpd (49.6 mmt), demonstrating a 13% decline QoQ amid the Company's compliance with its quotas under the new OPEC+ Agreement.
To ensure the fulfillment of its obligations under the new OPEC+ Agreement, the Company uses tools that proved to be successful during the previous periods of production cuts. The key tools are efficient well stock management, including limitation of flow rates without shut-ins, recurring well operation, and optimization of wellworks programme on the existing well stock. It needs to be noted that the management of well operation modes removes the need for well suspension and repair during prolonged down-time and subsequent start-up, which is important in terms of maintaining the potential for production recovery.
1H 2020 gas production constituted 31.8 bcm which is 4.9% lower YoY. This includes 2Q 2020 production that amounted to 15.2 bcm, a 8.8% decrease QoQ. The main reasons for the decline in the indicators are a decrease in associated petroleum gas production due to oil production cuts in accordance with the new OPEC+ Agreement, as well as a decline in gas demand amid the COVID-19 pandemic and seasonal factor.
As a result, 1H 2020 hydrocarbon production amounted to 5.40 mmboed (132.7 mmtoe), a 7% decrease YoY. 2Q 2020 average daily hydrocarbon production constituted 5.05 mmboed (62 mmtoe), a 12.2% decrease QoQ.
Development drilling and new wells commissioning
2Q 2020 development drilling footage amounted to 2.6 mln m, reaching 4.8 mln m in 1H 2020. The share of in-house drilling footage is traditionally maintained at more than 50%. As part of Rosneft-2022 strategy implementation, the Company continues to focus on the construction of high-tech wells, which provide more efficient reserve development and greater oil recovery rate compared to directional well drilling.
The number of newly commissioned wells reached 1.1 units in 1H 2020. The number of the most efficient new horizontal wells amounted to 756 units, a slight decrease YoY. At the same time, the share of such wells continues to increase: it reached 68% of the total number of newly commissioned wells in 1H 2020, which is 14 p.p. higher YoY. The share of newly commissioned horizontal wells with multistage hydrofracturing amounted to 462 units in 1H 2020, while their share in the total number of wells commissioned over the period reached 41%. Unit production per horizontal well constituted 4.9 th. tons, which overpasses this indicator for directional wells by more than 2.6 times.
Implementation of modern technologies in the upstream
The Company continues to develop its key assets under OPEC+ Agreement constraints, concentrating on the development and implementation of new technologies, including digital ones, which increase field development efficiency along with a cost-saving effect. The Company considers technological leadership as one of the key factors of competitiveness on the oil market.
Thus, a unique horizontal well drilled using the Fishbone technology was put into operation at the Pronkinskoye field of Orenburgneft. The starting flow rate of the well in carbonate formations was 66 tons of oil per day, while the actual operating parameters of traditional directional wells are 5-25 tons of oil per day. The new well has a vertical depth of 1,860 m, the length of the main horizontal wellbore of 1,000 m and the total aggregate length of the 4 branches of 1,200 m. This technological solution allowed for the increase in the reservoir recovery efficiency, as well as the drilling process optimization.
The Company created a service for the comprehensive implementation of transport services for hydraulic fracturing. This solution will reduce the average cost of one operation to prepare a well for hydraulic fracturing by 7%, as well as to improve the quality of the services provided. The efficiency is achieved through an integrated approach to the execution of work, which allows for the implementation of transport services on the turnkey basis and the optimization of the process of preparing for geological and technical operations.
Specialists of Rosneft United Research and Development Centre have developed a unique technology for designing the foundations of aboveground pipelines in the permafrost zone. The technology is based on the creation of a digital model of a linear object, which allows for case-by-case calculations and selection of optimal solutions for each pier, and not for a group of piers with similar loads, heights, geological and geocryological conditions. In the future, the technical solutions and the assessment of their costs will be carried out automatically with minimal participation of dedicated specialists.
Upstream projects development
The Company continues to develop its projects in accordance with the previously announced plans. In 1H 2020 the Company's share in total liquids production at the large greenfields launched since 2016 amounted to 9.67 mmt (393 kbpd), which is 9% higher than 1H 2019 level. At the same time, 2Q 2020 production of liquid hydrocarbons amounted to 4.61 mmt (375 kbpd). Their share in the total liquids production constituted 9.3% in the reporting quarter.
The development of the Erguinsky cluster is in progress with the Kondinskoye and Zapadno-Erguinskoye fields launched as part of the project. In 1H 2020 production at the cluster's fields increased by 5.9% YoY and reached 10.1 mmbbl (1.4 mmt over the period). In the course of the preparation for the launch this year, development drilling is conducted at 11 well pads of the Erguinsky license area along with construction of infrastructure facilities, infield pipelines and electric power transmission lines. Welding works at the pressure pipeline to transport oil to the Priobskoye field and Transneft pipeline system afterwards are nearing completion, preparatory work is underway to verify the testing of the pipeline at the finished sections.
As part of the Danilovsky oil and gas production cluster development project, the Company proceeded with preparing for the launch of the Severo-Danilovsky field in 2020. To develop the field it is planned to drill 95 wells, the majority of which will be horizontal. Drilling works are conducted with implementation of modern technologies and cutting-edge equipment. 10 wells have already been drilled at the project. Work continues on the construction of well pads, infrastructure facilities, the oil pipeline and road (operated in a year-round technological passage mode) to the Verkhnechonskoye field.
In accordance with the Company's plans, development drilling, preparatory, construction and installation work at Lodochnoye and Severo-Komsomolskoye fields are in progress. As part of the pilot commercial fields development production increased by 65% in 1H 2020 vs. 1H 2019 level and amounted to 5.1 mmbbl (0.7 mmt over the period).
Construction of key production facilities of the Rospan infrastructure is in progress. The 1st stage of the project is planned to be launched in December 2020. Rospan will produce over 21 bcm of gas, over 5 mmt of liquid hydrocarbons and over 1 mmt of industrial propane-butane per annum.
0.2 th. linear km of 2D and 3.3 th. sq. km of 3D seismic works were conducted in 1H 2020 on the Russian on-shore, 39 exploration and appraisal wells were tested with an 82% success rate. As a result of geological exploration, 17 new deposits and 4 new fields were discovered with АВ1С1+B2С2 hydrocarbon reserves amounting to c. 41 mmtoe.
Oil refining
In 1H 2020 47.4 mmt of oil were refined at the Company's refineries in Russia, which corresponds to 1H 2019 level, including, 21.5 mmt processed in 2Q 2020, which is 17.2% lower QoQ. The reduction in refining volumes is contingent on the optimization of refineries loading in the face of low refining margin as well as the current demand for petroleum products due to the COVID-19 pandemic.
Oil refining throughput at the Company's refineries in Germany in 1H 2020 amounted to 5.3 mmt, a 19.2% increase YoY, which is mainly attributed to the turnaround maintenance at PCK Raffinerie GmbH refinery in 1H 2019. In 2Q 2020, 2.5 mmt were processed at the refineries in Germany, which is 9.4% lower QoQ and is explained, first of all, by a decrease in demand for petroleum products in Germany amid the COVID-19 pandemic.
As a result, 1H 2020 refining throughput at the Company's refineries amounted to 52.7 mmt, a 1.7% increase YoY. In 2Q 2020 this indicator amounted to 24.0 mmt, while the refining depth increased by 1.4 p.p. to 75.2%, and light products yield constituted 56.3%.
Crude oil and petroleum products sales
In 1H 2020 international sales to non-CIS countries amounted to 61.8 mmt of crude oil, which is 8.6% lower YoY. In 2Q 2020 this indicator reached 25.8 mmt, including sales via Asian distribution channel which amounted to 14.9 mmt, or 57.8% of the total international non-CIS sales. Crude export from Russia to non-CIS countries constituted 52.2 mmt in 1H 2020, а 4.8% decrease YoY. In 2Q 2020 crude export from Russia to non-CIS countries reached 24.2, while the share of crude oil supplies under agreements with more than 1-year duration amounted to c. 90% of the indicated volume.
Over 1H 2020 the Company sold 52.7 mmt of petroleum products, which is 1.7% greater YoY, including 24.3 mmt of petroleum products sold in 2Q 2020. 1H 2020 international non-CIS sales of petroleum products increased by 12.2% YoY and reached 32.2 mmt. Petroleum products export from Russia to non-CIS countries amounted to 25.1 mmt, a 17.3% increase YoY, including 12.2 mmt of petroleum products exported in 2Q 2020. The share of petroleum products supplies under agreements with more than 1-year duration exceeded 90% of the indicated volume. 1H 2020 domestic sales of petroleum products amounted to 17.7 mmt, while sales in CIS countries constituted 1.9 mmt.
The Company continues to actively trade at Saint-Petersburg International Mercantile Exchange. In 2Q 2020 due to a decrease in demand amid the COVID-19 pandemic, the quotas of fuel sales were halved by the regulator. At the same time, the Company continued to steadily meet the needs of the domestic market of the Russian Federation, maintaining a high share of exchange sales, and exceeded the reduced quotas for motor fuel sales by 4 times.
Rosneft is interested in the active development of an exchange instrument for petroleum products trading. Thus, in May 2020, the Company increased its share in Saint-Petersburg International Mercantile Exchange equity capital from 13% to 23%, becoming its largest shareholder.
In the reporting quarter the Company continued to increase production and sales volumes of RMLS 40 low sulphur residual marine fuel that complies with the IMO requirements introduced since 2020. In particular, the Syzran Refinery has commenced the production of this fuel type. In 1H 2020 the Company supplied 747 th. tons of fuel to end consumers, namely domestic and foreign ship-owners, including 646 th. tons of low sulphur marine fuel fully compliant with the requirements of MARPOL. The new marine fuel RMLS 40 accounted for more than half of this volume (335 th. tons). The new fuel sales volume growth was accompanied by its sales geographic expansion as the Company began to supply RMLS 40 to the seaports of the Black Sea, Arctic and Baltic regions.
Retail business
In 1H 2020 retail business demonstrated stable operational results. Amidst the recovery in demand after the easing of restrictions related to the epidemiological situation in the country, retail sales of petroleum products increased by 18% in June 2020 compared to May.
All the stores and cafes at the Company's filling stations operate in strict accordance with the recommendations of Rospotrebnadzor for preventive and disinfection measures. The Company is constantly developing the services that provide remote interaction with customers. Thus, the efforts towards developing contactless payment services using the Yandex.Fuel application are in progress. The service is already available to customers at more than 1,000 filling stations in the key regions of presence.
As of the reporting quarter end, the Company's retail network comprised 3,065 filling stations and complexes, 3,002 of which are located in 66 constituent entities of the Russian Federation.
Key operating results for 2Q and 1H 2020:
2Q '20 | 1Q '20 | QoQ | 2Q '19 | YoY | 1H '20 | 1H '19 | YoY | |
Hydrocarbon production (kboepd) | 5,051 | 5,753 | (12.2)% | 5,710 | (11.5)% | 5,402 | 5,806 | (7.0)% |
Liquids production (mmt) | 49.56 | 56.98 | (13.0)% | 56.71 | (12.6)% | 106.54 | 114.34 | (6.8)% |
Gas production (bcm) | 15.16 | 16.63 | (8.8)% | 16.31 | (7.1)% | 31.79 | 33.43 | (4.9)% |
APG utilization rate | 73.7% | 75.9% | (2.2)п.п. | 76.7% | (3.0)п.п. | 74.9% | 79.5% | (4.6)п.п. |
Development drilling (th. m)* | 2,636 | 2,214 | 19.1% | 2,689 | (2.0)% | 4,849 | 5,184 | (6.5)% |
2D seismic (linear km)* | 56 | 112 | (50.0)% | 718 | (92.2)% | 168 | 1,783 | (90.6)% |
3D seismic (sq. km)* | 837 | 2,512 | (66.7)% | 1,708 | (51.0)% | 3,349 | 5,759 | (41.8)% |
Oil refining (mmt) | 24.00 | 28.72 | (16.4)% | 24.96 | (3.8)% | 52.72 | 51.83 | 1.7% |
Russian refineries | 21.49 | 25.95 | (17.2)% | 22.87 | (6.0)% | 47.44 | 47.37 | 0.1% |
Outside Russia | 2.51 | 2.77 | (9.4)% | 2.09 | 20.1% | 5.28 | 4.46 | 18.4% |
Refining depth | 75.2% | 73.8% | 1.4 p.p. | 74.8% | 0.4 p.p. | 74.4% | 74.6% | (0.2) p.p. |
Petroleum product output in Russia (mmt) | 20.93 | 25.07 | (16.5)% | 22.09 | (5.3)% | 46.00 | 45.76 | 0.5% |
Gasoline | 2.66 | 3.58 | (25.7)% | 3.66 | (27.3)% | 6.24 | 7.49 | (16.7)% |
Naphtha | 1.44 | 1.61 | (10.6)% | 1.18 | 22.0% | 3.05 | 2.47 | 23.5% |
Diesel fuel** | 7.19 | 8.50 | (15.4)% | 7.46 | (3.6)% | 15.69 | 15.58 | 0.7% |
Fuel oil | 5.00 | 6.36 | (21.4)% | 5.37 | (6.9)% | 11.36 | 11.20 | 1.4% |
Kerosene | 0.62 | 0.77 | (19.5)% | 0.83 | (25.3)% | 1.39 | 1.62 | (14.2)% |
Petrochemicals | 0.39 | 0.43 | (9.3)% | 0.39 | 0.0% | 0.82 | 0.82 | 0.0% |
Other | 3.63 | 3.82 | (5.0)% | 3.20 | 13.4% | 7.45 | 6.58 | 13.2% |
Petroleum products output outside Russia (mmt) | 2.54 | 2.93 | (13.3)% | 2.20 | 15.5% | 5.47 | 4.70 | 16.4% |
Light products yield | 56.3% | 56.9% | (0.6) p.p. | 58.4% | (2.1) p.p. | 56.6% | 58.3% | (1.7) p.p. |
Crude oil sales (mmt) | 29.1 | 37.4 | (22.2)% | 38.8 | 5.3% | 66.5 | 74.3 | (10.5)% |
International sales to non-CIS | 25.8 | 36.0 | (28.3)% | 35.7 | 12.8% | 61.8 | 67.6 | (8.6)% |
International sales to CIS | 2.0 | - | - | 1.9 | 5.3% | 2.0 | 4.1 | (51.3)% |
Domestic sales | 1.3 | 1.4 | (7.7)% | 1.2 | 8.3% | 2.7 | 2.6 | 3.6% |
Petroleum products sales (mmt) | 24.3 | 28.4 | (14.4)% | 24.2 | 0.4% | 52.7 | 51.8 | 1.7% |
International sales to non-CIS | 14.8 | 17.4 | (14.9)% | 12.8 | 15.6% | 32.2 | 28.7 | 12.2% |
International sales to CIS | 1.0 | 0.9 | 11.1% | 1.0 | 0.0% | 1.9 | 2.0 | (5.0)% |
Domestic sales | 8.0 | 9.7 | (17.5)% | 9.5 | (15.8)% | 17.7 | 19.5 | (9.2)% |
Sales of bunker fuel to end-users | 0.5 | 0.4 | 18.5% | 0.9 | (44.4)% | 0.9 | 1.6 | (43.8)% |
Petrochemical products sales (mmt) | 0.5 | 0.7 | (17.3)% | 0.7 | (28.6)% | 1.2 | 1.4 | (14.3)% |
International sales | 0.2 | 0.2 | (25.7)% | 0.2 | (10.1)% | 0.4 | 0.5 | (20.0)% |
Domestic sales | 0.3 | 0.5 | (12.9)% | 0.5 | 0.1% | 0.8 | 0.9 | (11.1)% |
Gas sales (bcm) | 13.06 | 14.91 | (12.4)% | 14.92 | (12.5)% | 27.97 | 31.38 | (10.9)% |
* According to management data
** Including marine fuel