11 Nov 2016 07:00
Financial results for 3Q and 9M of 2016:
· EBITDA margin is up to 25.4% for 9M 2016 (+1.3 bp Y-o-Y)
· Keeping 3Q upstream operating costs per boe unchanged q-o-q
· Maintaining industry leadership in free cash flow generation: RUB 48 blnin 3Q 2016
Consolidated IFRS financial results for 3Q 2016:
| 3Q 2016 | 2Q 2016 | Change, % | 9M 2016 | 9M 2015 | Change, % |
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Financial results | RUB bln (except %) |
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Total revenue and equity share in profits of associates and joint ventures | 1,223 | 1,232 | (0.7)% | 3,503 | 3,954 | (11.4)% |
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EBITDA | 292 | 348 | (16.1)% | 913 | 967 | (5.6)% |
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EBITDA margin | 23.3% | 27.6% | (4.3) bp | 25.4% | 24.1% | 1.3 bp |
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Net income attributable to Rosneft shareholders | 26 | 89 | (70.8)% | 129 | 302 | (57.3)% |
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Net income margin | 2.1% | 7.2% | (5.1) bp | 3.7% | 7.6% | (3.9) bp |
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Capital expenditures | 167 | 154 | 8.4% | 475 | 409 | 16.1% |
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Free cash flow | 48 | 61 | (21.3)% | 189 | 517 | (63.4)% |
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Upstream operating expenses/boe | 164 | 164 | - | 161 | 157 | 2.5% |
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| USD bln1 (except %) |
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Total revenue and income of associates and joint ventures | 19.4 | 19.2 | 1.0% | 53.1 | 68.3 | (22.3)% |
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EBITDA | 4.5 | 5.3 | (15.1)% | 13.5 | 16.5 | (18.2)% |
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Net income attributable to Rosneft shareholders | 0.4 | 1.4 | (71.4)% | 2.0 | 5.3 | (62.3)% |
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Gross debt | 46.3 | 45.7 | 1.3% | 46.3 | 47.5 | (2.5)% |
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Net debt | 26.1 | 23.4 | 11.5% | 26.1 | 24.5 | 6.5% |
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Capital expenditures | 2.6 | 2.3 | 13.0% | 7.0 | 6.9 | 1.4% |
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Free cash flow | 1.3 | 1.3 | - | 4.1 | 9.7 | (57.7)% |
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For reference |
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Average Urals price, USD per bbl | 44.0 | 43.8 | 0.5% | 40.0 | 54.6 | (26.8)% |
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Average Urals price, th. RUB per bbl | 2.85 | 2.89 | (1.4)% | 2.74 | 3.24 | (15.5)% |
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1Calculated using average monthly Central Bank of Russia exchange rates for the reporting period. Gross debt and net debt are estimated using the closing exchange rate of Central Bank of Russia as of September, 30, 2016, June, 30, 2016 and September, 30, 2015, respectively.
Commenting the results for 3Q 2016, Rosneft CEO Igor Sechin said:
"In 3Q 2016 the environment on the commodity markets remained difficult. Additional pressure on the company's profitability was from considerable negative export duty lag effect. I would like to highlight positive results of Rosneft's management cost control and generation of positive free cash flow over the last years in conditions of high market volatility. This is a unique achievement among the peers. In October the Company acquired the state-owned stake in Bashneft. We will make our best efforts to maximize the synergy potential from this asset integration. The first important steps on its realization are being conducted already at early consolidation stage in 4Q 2016."
Financial performance
Total revenue and equity share in profits of associates and joint ventures
In 3Q 2016 revenue amounted to RUB 1,223 bln (USD 19.4 bln). Despite lower crude oil price in RUB terms revenues did not change significantly compared to 2Q 2016 as a result of higher oil production, crude oil processing and maximizing supply to premium channels.
For 9M 2016 revenues declined by 11.4% compared to 9M 2015 mostly due to lower oil prices: average Urals price was at $40 for 9M 2016 vs. $54.6 for 9M 2015.
EBITDA
The Company keeps strengthening its OPEX discipline: upstream operating expenses per boe remained unchanged compared to 2Q 2016 and amounted to RUB 164/boe (USD 2.5/boe) in 3Q 2016.
In 3Q 2016, the earnings before interest, taxes, depreciation, and amortization (EBITDA) reached RUB 292 bln (USD 4.5 bln), EBITDA margin - 23.3%. EBITDA margin was negatively impacted by customs duty lag. As a result of significant growth in oil prices in 2Q 2016, the base for export duty materially increased while average pricing level remained almost unchanged in 3Q 2016. This translated into a negative effect on the profitability at around RUB 60 bln.
In 9M 2016, EBITDA amounted to RUB 913 bln (USD 13.5 bln), declining only by 5.6% YoY despite a significant negative impact of external factors (lower ruble oil price - RUB 27 bln, additional tax burden related mainly to the tax maneuver - RUB 119 bln). 9M 2016 EBITDA margin increased up to 25.4% (1.3 bp growth vs 9M 2015) thanks to strong cost control and increased sales efficiency.
Net income attributable to Rosneft shareholders
In 3Q 2016, the Company net profit was at RUB 26 bln. The decline was primarily driven by lower operating profit.
CAPEX
CAPEX in 3Q 2016 increased by 8.4% up to RUB 167 bln (USD 2.6 bln) which was driven by planned growth of volume of production drilling.
9M 2016 CAPEX increased 16.1% Y-o-Y. Upstream CAPEX grew by 33.9%, mainly driven by increased volume of drilling and workovers and intensive development of new projects.
Free cash flow
Free cash flow amounted to RUB 48 bln (USD 1.3 bln) in 3Q 2016 and to RUB 189 bln (USD 4.1 bln) in 9M 2016. The Company keeps generating sustainably positive free cash flows despite quite volatile market conditions.
Debt burden
Since October 2015, gross debt of the Company went down by 2.5% in dollar terms, reaching USD 46.3 bln as of end 3Q 2016. In 3Q 2016 the Company paid off eurobonds (USD 1 bln of total nominal value) issued by the former TNK-BP Group in 2006.
Information Policy Division
Rosneft Oil Company
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
November 11, 2016
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.