6 Nov 2019 07:01
Financial results for 3Q and 9М 2019
·; 9M 2019 Net income jumped by 25% YoY to RUB 550 bln, including a QoQ growth to RUB 225 bln in 3Q 2019
·; 3Q 2019 EBITDA increased by 7.6% QoQ to RUB 554 bln with a margin improvement to 24.4%
·; 3Q 2019 FCF growth by more than 2 times QoQ to RUB 281 bln
·; Financial debt and trading liabilities decreased by RUB 820 bln since the year beginning
Consolidated IFRS financial results for 3Q 2019 and 9M 2019:
| 3Q 2019 | 2Q 2019 | Change, % | 9M 2019 | 9M 2018 | Change, % |
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| RUB bln (except %) |
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Revenues and equity share in profits of associates and joint ventures | 2,240 | 2,135 | 4.9% | 6,452 | 6,073 | 6.2% |
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EBITDA | 554 | 515 | 7.6% | 1,617 | 1,593 | 1.5% |
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EBITDA margin | 24.4% | 23.8% | 0.6 p.p. | 24.7% | 25.7% | (1.0) p.p. |
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Net income attributable to Rosneft shareholders | 225 | 194 | 16.0% | 550 | 4403 | 25.0% |
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Net income margin | 10.0% | 9.1% | 0.9 p.p. | 8.5% | 7.2% | 1.3 p.p. |
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Capital expenditures | 198 | 222 | (10.8)% | 634 | 679 | (6.6)% |
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Free cash flow (RUB equivalent)1 | 281 | 135 | 108% | 613 | 872 | (29.7)% |
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Upstream operating expenses RUB/boe | 206 | 203 | 1.5% | 202 | 190 | 6.3% |
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USD bln2 (except %) |
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Revenues and equity share in profits of associates and joint ventures | 35.1 | 33.6 | 4.5% | 100.6 | 100.6 | 0% |
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EBITDA | 8.5 | 8.0 | 6.3% | 24.8 | 25.7 | (3.5)% |
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Net income attributable to Rosneft shareholders | 3.6 | 3.0 | 20.0% | 8.5 | 7.3 | 16.4% |
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Capital expenditures | 3.0 | 3.5 | (14.3)% | 9.7 | 11.1 | (12.6)% |
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Free cash flow | 4.4 | 2.0 | 120% | 9.4 | 13.9 | (32.4)% |
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Upstream operating expenses USD/boe | 3.2 | 3.2 | 0% | 3.1 | 3.1 | 0% |
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For reference |
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Average Urals price. USD per bbl | 61.3 | 67.9 | (9.7)% | 64.1 | 70.7 | (9.3)% |
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Average Urals price. th. RUB per bbl | 3.96 | 4.38 | (9.7)% | 4.17 | 4.34 | (3.9)% |
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1The calculation includes interest expense on the prepayments on the long-term oil and petroleum products supply agreements.
2Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.
3Net income in 9M 2018 is adjusted due to revision of estimation of the assets purchased in 2018.
Commenting on 3Q 2019 results Rosneft's Chairman of the Management Board and Chief Executive Officer Igor Sechin said:
"In the third quarter of the current year the Company was able to increase liquids production QoQ and partially compensate for 2Q 2019 production decline as a result of the restriction of oil intake into Transneft system of trunk pipelines. We restored crude oil refining throughput and strengthened our positions in the traditional markets.
In the reporting period, the sales growth in the falling crude oil price environment, combined with effective control over the costs, led to restoration of the EBITDA margin. Taking into account the efforts of management to optimize working capital the free cash flow increased by more than 2 times compared to the previous quarter.
On September 30, the Company's shareholders approved the payment of a record interim dividend of RUB 162.6 billion. Taking into account the strong financial results for the third quarter and relatively stable current market conditions the shareholders have the right to expect an increase of dividends for the entire year 2019."
Financial performance
Revenues and equity share in profits of associates and joint ventures
3Q 2019 revenues amounted to RUB 2,240 bln (USD 35.1 bln). The increase in QoQ sales was driven by higher sales volumes of petroleum products and crude oil (+10.4%) vs 2Q 2019 in the falling crude oil price environment (-9.7%).
9M 2019 revenues increased by 6.2% YoY mainly due to higher sales volumes of crude oil (+19.6%) in the falling crude oil price environment (-9.3%).
EBITDA
3Q 2019 EBITDA amounted to RUB 554 bln (USD 8.5 bln), an increase of 7.6% in RUB terms vs2Q 2019. The growth is mainly driven by an increase in sales volumes of petroleum products (+26.9%) and crude oil in the markets of the Company' presence, and also by lower general and administrative expenses.
9M 2019 EBITDA increased to RUB 1,617 bln (USD 24.8 bln) due to growth of crude oil sales volumes mainly in the Eastern direction (30.9%) and strengthened control over the costs.
3Q 2019 lifting costs amounted to 206 RUB/boe (3.2 USD/boe), increasing by 1.5% vs 2Q 2019 which is mainly driven by a seasonal increase in maintenance and repairs of ground infrastructure and oil equipment.
9M 2019 lifting costs amounted to 202 RUB/boe (3.1 USD/boe), growing by 6.3% vs 9M 2018. The increase was due to higher electricity expenses (+11%), rise of maintenance and repair costs for the growing fund of wells and ground infrastructure, associated transport costs, and labor costs.
Net income attributable to Rosneft shareholders
In 3Q 2019 net income attributable to Rosneft shareholders amounted to RUB 225 bln (USD 3.6 bln), an increase of 16.0% vs 2Q 2019, which was mainly driven by the higher operating income (+10.9%).
Increase in net income attributable to Rosneft shareholders in 9M 2019 of 25% YoY was driven by the positive dynamics of the Company's operating income and the reduction of financial expenses.
Capital expenditures
3Q 2019 capital expenditures amounted to RUB 198 bln (USD 3.0 bln). In 9M 2019 capital expenditures amounted to RUB 634 bln (USD 9.7 bln), a reduction of 6.6% YoY, due to optimization of the development drilling program in the context of the strategic initiative to increase the share of more efficient horizontal wells at the Company's brownfields. The Company is reviewing options for aligning the capital investment profile of its large projects with the extension of quotas under the OPEC+ production cut agreement.
Free cash flow
3Q 2019 free cash flow amounted to RUB 281 bln (USD 4.4 bln). The significant increase in free cash flow compared to 2Q 2019 was driven by the EBITDA increase, lower capex and corresponding changes of working capital. In 9M 2019 free cash flow amounted to USD 613 bln (USD 9.4 bln).
Financial stability
Keeping its focus on the debt reduction, the Company decreased the financial debt and trading liabilities by 14.1% or by RUB 820 bln since the beginning of 2019. Net debt and trading liabilities dropped by RUB 113 bln during 2019. Net debt/EBITDA was at 1.4x in RUB terms at the end of 3Q 2019.
Rosneft Information Division
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
November 6, 2019
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.