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Rosneft' NK OAO : Rosneft posts strong results in H1 2013, including record-high daily hydrocarbon production of 4.8 mln boe against EBITDA growth of 36.4% and free cash flow of 68 bln rubles

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07/29/2013 | 03:41pm CEST

July 29, 2013

On July 29, 2013 Rosneft publishes its consolidated IFRS financial statements for Q2 and H1 2013.

H1 2013 H1 2012 Change, % Q2 2013 Q1 Change, %
Operating results
Hydrocarbon production, th. boepd 4,804 2,628 82.8% 4,786 4,804 (0.4)%
Crude oil production, th. bpd 4,183 2,410 73.5% 4,185 4,169 0.4%
Gas production, th. boepd 621 217 186.2% 602 635 (5.2)%
Refinery throughput, mln t 39.45 29.58 33.4% 23.61 15.84 49.1%
Financial results, RUB bln
Revenues and equity share in profits of associates and joint ventures 1,988 1,484 34.0% 1,176 812 44.8%
EBITDA 371 272 36.4% 215 156 37.8%
Net income 137 116 18.1% 35 102 (65.7%)
Capital expenditures 248 243 2.1% 153 95 61.1%
Free cash flow 68* (20) - 35* 33* 6.1%

* Adjusted by prepayments under long-term crude oil supply contracts in the amount of RUB 258 bln in H1 2013, including RUB 26 bln and RUB 232 bln in Q2 and Q1 2013 respectively.

Hydrocarbon production (including production by fully and proportionally consolidated subsidiaries and share in production by affiliates) increased by 82.8% in H1 2013 and reached 4,804 th. boepd. H1 crude oil production reached 4,183 th. bpd, which represents a 73.5% increase Y-o-Y, while gas production more than doubled and reached 15.3 bcm. Consolidated crude oil production by the united company totaled 96 mln tons in H1 2013. The organic growth of the united Company production reached 0.4% in H1 2013. Growth of hydrocarbon production is due to the acquisition of new assets, as well as organic growth at Vankorneft and Samaraneftegaz fields.

The daily crude oil production remained almost flat in Q2 2013, while daily gas production slid by 5.2% due to the seasonal reduction of demand.

Throughput at Rosneft's Russian and international refineries amounted to 39.45 mln tons of crude oil in H1 2013, up 33.4% Y-o-Y. The growth is largely due to the acquisition of new refining capacities in Russia and abroad. Refinery throughput of the united Company totaled 47 mln tons year to date. The organic growth of the united Company refinery throughput amounted to 2.0% in H1 2013.

Refining volumes in Q2 2013 rose 49.1% Q-o-Q and reached 23.61 million tons, with growth totaling 55.8% at Russian and 15.5% at international facilities of the Company. In addition to the expansion of the production facilities, the Q-o-Q growth is due to the seasonal surge of the demand for petroleum products, as well as the reduction of the scope of planned turnarounds at Komsomolsk, Syzran and Tuapse refineries.

Revenues (including equity share in profits of associates and joint ventures) increased by 34.0% to RUB 1,988 bln in H1 2013. The growth is mainly due to the expansion of the Company's operations on the domestic and international markets, partly curbed by the weakening on the global oil and petroleum product markets.

Earnings before interest, taxation, depreciation and amortization (EBITDA) leapt by 36.4% in H1 2013 and reached RUB 371 bln. The positive effect from business expansion was partly offset by the indexation of the basic rate of MET and the tariffs of natural monopolies, as well as by one-off costs related to fund raising in the accounted period.

Despite the negative effects of currency exchange rate and the growth of spending to uphold commitments related to borrowings, the net income of the Company increased by 18.1% in H1 2013 and reached RUB 137 bln.

Rosneft has been generating a free cash flow of over RUB 30 bln for the second quarter in a row. As a result, the free cash flow amounted to RUB 68 bln in H1 2013, versus negative cash flow of RUB 20 bln in the same period last year.

Commenting on Q2 2013 results, Rosneft President Igor Sechin said: "The results of the second quarter demonstrate the effectiveness of integration of new acquired assets into the operating and financial activities of Rosneft. Despite the complexities of the process we have managed to create a Company with uniform business processes and a single center for the planning of all production activities within just several months. As a result, despite the deterioration of the macroeconomic situation, Rosneft demonstrates a growth of revenues, EBITDA and free cash flow. The financial stability of the Company combined with its active international cooperation, showcased during the St Petersburg economic forum, laid firm groundwork for further efficient operations, which ensures the increase in the Company shareholder value and consolidation of its leading positions on the global energy market.

Strong financial results reflect the fruitful efforts taken by Rosneft to improve and optimize its staff structure. Rosneft gas division has been significantly enhanced and the Company has considerably expanded its scope of interests in the area of its gas strategy implementation. Rosneft consolidated 100% of Itera, which resulted in a significant synergy.

As part of Company's long-term strategy implementation, Eric Maurice Liron, former Vice President for Drilling, Development and Services, has been appointed First Vice President overseeing Production division. Mr Liron has a track record of several decades in Schlumberger, one of the world's major oilfield service providers, and an extensive work experience in the Middle East, South-East Asia, Africa and Russia. He is a member of SPE (Society of Petroleum Engineers). During his time in Rosneft, he demonstrated excellent professional qualifications and brought into the Company high operating standards adopted in global oil and gas majors.

Gennady I. Sarychev has been appointed Acting Vice President for Drilling, Development and Services. Gennady is a high-quality specialist who has long-established operations background with Rosneft. He held various roles in production and oilfield services.

Some new appointments were also made in several Company Subsidiaries in order to improve performance. Nuriman F. Kunafin has been appointed Director of RN-Krasnodarneftegaz. Nuriman is a good specialist in large-scale production projects with successful work experience in Company Headquarters.

Evgeny V. Zadorozhny has been appointed Director General of OJSC TNK-Uvat. Evgeny's career developed in the area of oil production. Recently he held a position of Director for Operating Efficiency of OJSC RN-Management, the brunch of Upstream Assurance and Technical Development Center in the city of Tyumen.

We continue work to improve the Company's organizational structure. I take the opportunity to thank Eduard Yu. Khudaynatov, my friend and colleague, for his contribution to the Company's success and improved cost efficiency. Eduard has kept his promise to stay with the Company for one year as First Vice President and now moves on to develop new projects where his professionalism, experience and skills will undoubtedly be in demand. I wish him every success. I am confident that Eduard Khudaynatov's new assignment will give momentum to developing new ambitious projects in the fuel and energy complex. The above will make it possible to involve a considerable resource potential and to engage a significant amount of professional personnel. The Russian market has a sustainable demand for private business development in the oil and gas segment. In its turn, Rosneft is well positioned to compete in the oil and gas industry with the leading companies in Russia as well as with the largest global players."

Rosneft Information Division
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
July 29, 2013

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.

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Financials ($)
Sales 2018 123 B
EBIT 2018 17 996 M
Net income 2018 7 331 M
Debt 2018 59 335 M
Yield 2018 4,94%
P/E ratio 2018 6,32
P/E ratio 2019 4,97
EV / Sales 2018 1,02x
EV / Sales 2019 0,99x
Capitalization 65 821 M
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 7
Average target price 7,01 $
Spread / Average Target 13%
EPS Revisions
Igor Ivanovich Sechin Chairman-Management Board & Vice Chairman
Gerhard Schroeder Chairman
Petr Ivanovich Lazarev Finance Director
Valeriy Vladimirovich Nikitin Director-Information Technology
Artur Matthias Warnig Deputy Chairman
Sector and Competitors
1st jan.Capitalization (M$)
TOTAL13.98%156 675
EQUINOR22.32%88 061
ENI13.30%66 221