Rosneft Posts Q1 Net Income Rise of 8.3%

Russian state-owned oil giant Rosneft posted a rise in first-quarter net income on May 5 of 8.3% year on year to 13 billion rubles ($221.4 million).

"The Company maintained industry leadership in investments pursuing monetisation of unique reserves base and planned completion of large investment projects in near-term,” Rosneft CEO Igor Sechin said in a press release, commenting the results the first quarter of 2107.

Sechin noted that the environment remains difficult. Continuing world commodity markets volatility, rouble appreciation – all of this impacted Rosneft’s financial results, he said.

At the same time, Rosneft’s management takes all efforts to further improve efficiency and realise synergy effect from Bashneft integration, Sechin said. Undertaken measures let the Company maintain the operating profit in dollar terms at the level of the fourth quarter of 2016 and increase it by more than 1.5 times year-on-year, Sechin said.

Rosneft continues effective communication with the Russian government regarding investment drivers and schemes for realisation of Rosneft’s reserves base potential, and issues of sustainable financial model implementation for refining business, Sechin said.

Taking into consideration new strategic acquisitions which synergy effect will be realized in near future, Rosneft continues maintaining conservative level of financial leverage (net debt/EBITDA 1.56x) and stable cash flow generation, the CEO said.

In the first quarter of 2017 revenues amounted to 1,410 billion roubles ($24.8 billion). Moderate decrease in revenues in rouble terms compared to the fourth quarter 2016 was due to significant rouble appreciation and decline of crude oil export volumes in current external limitations. Revenues in dollar term increased by 2.9% quarter to quarter and in more than 1.5 times year-on-year.

In the first quarter of 2107 a positive effect of export duty lag decreased by 17 billion roubles verses the fourth quarter of 2016, Rosneft said.

However, average oil price growth by 8.2%, 6.7% decrease in upstream operating expenses to 168 roubles per barrel of oil equivelent on the background of planned optimisation of expenses on equipment repair and maintenance, administrative expenses control and realisation of synergies from acquisition of new assets contributed to maintaining EBITDA in dollar terms ($ 5.7 billion) approximately at the level of the fourth quarter of 2016. However, EBITDA in rouble terms in the first quarter of 2017 decreased to 333 billion roubles due to significant negative impact of rouble appreciation.

On the background of rouble strengthening (7.2%) and increased MET rate (17.5%) EBITDA margin decline was only 1.2 p.p. quarter to quarter to 22.8%.

Improved macro conditions, increase in production, management efforts to control expenses and starting realisation of synergy effect from the acquisition of new assets encouraged EBITDA growth by 22.0% year-on-year.

Net income attributable to Rosneft shareholders amounted to 13 billion roubles in the first quarter of 2017 (+8.3% vs adjusted net income in the first quarter of 2016) in view of significant negative effect of foreign exchange rates due to rouble appreciation.

Taking into account the seasonality, capital expenditures decreased to 192 billion roubles ($3.3 billion) in the first quarter of 2017. Compared to the first quarter of 2016 capital expenditures increased by 24.7% in rouble terms (57.1% in dollar terms) in accordance with the plan, Rosneft said.

In the first quarter of 2017 free cash flow exceeded 89 billion rubles ($1.4 billion) during significant decrease in impact of working capital changes resulted from crude oil and petroleum prices relative stabilisation.

As of the end of the first quarter 2017 net debt/EBITDA ratio was at 1.56 in dollar terms. Stable cash flow secured the fulfillment of planned payments on financial debt in the first quarter of 2017 and Rosneft’s obligations amounted to 50 billion roubles on the mandatory offer for the acquisition of Bashneft ordinary shares from minority shareholders. Rosneft continues conservative liquidity management taking into consideration active stage of development of significant investment projects.