OREANDA-NEWS. September 20, 2011. NK “RussNeft”, one of the leading vertically-integrated oil companies in the Russian Federation, announces the consolidated financial and production results for the 1 quarter of 2011.                      

KEY FINANCIAL RESULTS FOR THE REPORTING PERIOD

OIBDA index in the reporting period amounted to USD  927 million which 43% exceeds the same index for the analogous period of 2010 (USD  650 mln.).

 Revenue in the reporting period amounted to USD  4 532 million which 40% exceeds index for the analogous period of the last year (USD  3 227 mln.).

Net profit in the reporting period amounted to USD  661 million which is significantly higher than index in similar period of 2010 that amounted to USD  153 mln.  

The total debt of JSC  NK “RussNeft” in the reporting period decreased by 12.4% from USD  6 211 mln. to USD  5 442 mln.

KEY OPERATING RESULTS FOR THE REPORTING PERIOD

Oil production volume in the I quarter of 2011 increased up to 4% as compared with the analogues period of the last year and amounted to 6 552 thousand tons.

Refining output in the 1st quarter of 2011 increased up to 0.1% as compared with the analogues period of the last year and amounted to 2 510 thousand tons. 

KEY FINANCIAL AND OPERATING DATA 

 

For the reporting period

Last year’s analogues period

Changes,

%

Sales Revenues (USD  mln.)

4 532

3 227

40%

OIBDA (USD  mln.)

927

650

43%

Operating income (USD  mln.)

781

532

      47%

Net profit (USD  mln.)

661

153

333%

Oil production (thousand tons)

6 552

6 270

4%

Oil refining (thousand tons)

2 510

2 931

-14%

OPERATING RESULTS

Production

During the reporting period JSC  NK “RussNeft” continued to conduct exploration and production of oil within the territory of Khanty-Mansiysk Autonomous Okrug, Yamalo-Nenets AO, the republics of Udmurtiya, Bashkortostan, Ulyanovsk, Saratov, Volgograd, Penza, Kirov Regions. Geographic reach of the holding in the first-quarter of the current year did not undergo changes.

In the first-quarter of 2011 the Company launched a long-term development strategy, approved by the shareholders of JSC  NK “RussNeft” in December 2010. Its main directions are hydrocarbon production growth, geologic exploration, the development of gas projects. The holding plans in 2011 to achieve significant growth in hydrocarbon production (up to 13.600 million tons) due to intensive drilling at new oilfields and realization of geological and engineering operations program. In 2011 the volume of investments into the realization of industrial programs will reach 16 billion rubles, herewith 9 billion rubles – into drilling. In the first-quarter of 2011 the Company conducted intensive drilling in Western Siberia, Udmurtia, Ulyanovsk and Saratov regions. Thus, in Udmurtia the current year “RussNeft” plans to put into operation 35 new wells at 7 oilfields: Tzentralnoye, Yuskinskoye, Pionerskoye, Korobovskoye, Patrakovskoye, Oblastnovskoye and Tukmachevskoye. Additional production due to putting new wells into operation will amount to 333.427 thousand tons of oil.

At Shapshinskaya group of oilfields (KhMAO) operational drilling was carried out at 5 well pads of all oilfields of the group. During the reporting period 21 new wells were put into operation, 8 of them are with horizontal bored sections. Average daily production of horizontal wells was 65 tons per day. Till the end of the year the Company plans to put into operation 46 new wells, including 11 horizontal ones. Herewith, the effective implementation of geological and engineering operations program for 6 months of 2011 made it possible to produce additional 1.9 million tons of oil. In general, the successful implementation of exploratory drilling programs, geotechnical measures and conducting geological studies of subsurface resources at Shapshinskaya group of oilfields will allow the holding to produce 1.420 million tons of hydrocarbon raw materials in 2011.

In 2011 at the oilfields of Variogan block 484 geological and engineering operations are planned to be fulfilled, including drilling of 35 new wells. Due to the implementation of the planned operations JSC  “Varioganneft” till the end of the year will produce additional 644 thousand tons of oil.

All these measures enabled “RussNeft”, according to the results of the first half-year, to achieve the daily production level of 37 thousand tons. This production index has achieved the 2007 level and 4% exceeds the last year’s analogues figure.

 

For the reporting period

Last year’s analogues period

Changes, %

Oil production (thousand tons)

 6 552

 6 270

  4%

Average daily oil production

(thousand tons/per day)

 36,20

 34,64

  4%

Gas projects

One of the priorities of the Company’s activities during the reporting period was the realization of projects concerning production and utilization of associated and natural petroleum gas. For these purposes “RussNeft” in the next 3 years will channel investments in amount of 4 billion rubles, 1 billion rubles of which will be spent on the construction of a gas pipeline in Tyumen Oblast.

Thus, in the first half-year “RussNeft” managed to complete the construction of the lineal part of the gas pipeline "CPF of Mokhtikovskoye oilfield – gas turbine power station of Zapadno-Poludennoye oilfield". Works were conducted within the framework of the joint project of “Aganneftegasgeologiya” (a subsidiary enterprise of NK “RussNeft”) and “Tomskneft VNK” (a subsidiary enterprise of NK “Rosneft”).

The length of the gas pipeline is 15.6 km. In the 1st half-year testing of the gas pipeline was conducted. Preparations are under way to test-launch and to install block valve stations. Putting the gas pipeline into operation will allow “RussNeft” to transport more than 1 million cubic meters of associated petroleum gas monthly at gas turbine power station of Zapadno-Poludennoye oilfield.

"RussNeft" plans to continue paying special attention to execution of projects, aimed at increasing the effective use of associated petroleum gas (APG) and also to programs of natural gas production, gas processing and gas energy.  

Within the frames of this direction the Company has formed and approved short-term (for 2011) and medium-term (for 2012-2013) programs of APG efficient use. Their realization will make it possible to achieve 95 % level of APG use by the Company’s subsidiary enterprises according to the Government Regulation of the RF of 08.01.2009 №7 “On measures to encourage the reduction of atmospheric air pollution with combustion products of associated petroleum gas at flares”.

Program activities provide for significant capital investments, which will be directed to the construction of a number of objects of engineering infrastructure at all subsidiary enterprises. Total investment volume for the period 2011-2013 will reach 4 241 million rubles. 

Resources

Oil, mln. barrels

As of the end of the reporting period

As of the end of the last year’s analogues period

 

Changes, %

 

recoverable

      1 607

       1 549

      4%

 

prospective

       644

        691

     -7%

 

possible

       903

        902

      0%

 

Gas, mln. cubic feet

As of the end of the reporting period

As of the end of the last year’s analogues period

 

Changes, %

recoverable

    880 275

     884 405

      0%

prospective

    337 231

     327 269

      3%

possible

    356 354

     322 954

     10%

Refining

                          Key indicators for the reporting period

 

For the reporting period

 Last year’s analogues period

Changes, %

Refining output (thousand tons) 

     2 510

     2 507

   0.1 %

Production of petrochemicals

(thousand tons)

      2 420

     2 384

  1.5%

 

Refining depth (%)

       58%

       58%

     0%

Capital investments (USD  mln.)

       3

        2

   47 %

FINANCIAL OPERATING RESULTS

USD  mln.

For the reporting period

Last year’s analogues period

Changes, %

            Sales revenue

4 532

3 227

40%

Oil sales

2 939

1 799

53.4%

Sales of oil products and petrochemicals

1 545

1 390

11%

Other operating income

47

38

23%

Total revenue

4 532

3 227

40%

Operating costs

3 751

2 695

39%

Oil and gas production costs

520

402

29%

Other costs on oil and gas

11

12

-8%

Oil processing costs

(including purchase of third-party oil)

       413

372

11%

Marketing structures costs

6

10

-38%

Other costs

146

51

184%

Commercial costs

427

355

20%

Export tax

1 366

951

44%

Taxes on production

(MET and other taxes)

861

541

59%

Total costs and expenses

3 751

2 695

39%

Revenue from operating activities

781

532

47%

Interest (net)

-233

-274

-15%

Other income and expenses, including:

335

-75

544%

Dividends

4

59

-93%

Foreign exchange difference

296

-86

445%

Profit before tax

882

183

383%

Income tax charge

221

30

638%

Net profit

661

153

333%

REVENUE STRUCTURE

 (USD  mln.)

For the reporting period

Last year’s analogues period

Changes, %

Oil

 

 

 

Oil export sales

    2 269

    1 394

  63%

Domestic oil sales

    670

    405

  65%

Total oil sales

    2 939

    1 799

  63%

Oil products

 

 

 

Export sales of oil products

   1 045

    1 005

   4%

Domestic sales of oil products

   500

    383

  30%

Total oil products sales

   1 545

    1 390

  11%

Other sales

   47

    38

  23%

Total sales revenue

   4 532

    3 227

  40%

FACTORIAL REVENUE ANALYSIS

 

USD  bln.

Revenue as of the first half of the year 2010

3 227

Factors that influenced the change in revenue:

 

    oil price increase

767

    increase in volume of oil sales

373

    oil products price increase

488

    volume reduction of oil products sales

-333

    other sales

9

Revenue as of the first half of the year 2011

4 532

SALES PATTERN

(thous. tons.)

During the accounting period

During the same period last year

Changes,%

Crude oil

crude oil export sales

3 111

2 726

14%

crude oil domestic sales

1 912

1 659

15%

Sum-total of oil sales

5 023

4 386

15%

Oil products

oil products export sales

1 564

1 610

-3%

oil products domestic sales

878

694

21%

Sum-total of oil products sales *

2 442

2 304

5,7%

Sum-total of crude oil and oil products sales

 

7 465

6 690

10%

*taking into account supplementary refining of commercial oil

Crude oil export sales

The revenues from crude oil export sales in the first half of the year 2011 made USD  2 269 million that is by 63% more, than during the same period in 2010.

The increase in revenues mainly occurs due to the increase in oil prices by 43% and the increase in volume of oil export sales by 14%.

Crude oil domestic sales

During the accounting period the revenue from oil sales in the domestic market made USD  670 million as compared to USD  405 million in the first half of the year 2010. The increase in revenues occurs both due to the increase of crude oil domestic sales and price rises.

The volume of sales in the domestic market in the first half of the year 2011 made 1 912 thousand tons of oil that is by 15% more as compared to 1 659 thousand tons of oil in the first half of the year 2010.

Oil products export sales

The revenues from oil products export sales in the first half of the year 2011 made USD  1 045 million that is by 4% more, than during the same period last year.

The volume of oil products export sales during the accounting period made 1 564 thousand tons. Basically, the Company exported fuel oil (42%), diesel oil (30%), vacuum gasoil (11%), jet fuel (5%) and gasoline (8%).

Oil products sales

During the accounting period the revenues from oil products sales in the domestic market made USD  500 million that is by 30% more than in the first half of the year 2010. The increase in revenues occurs due to the price rise and effective marketing policy, being flexible to the volatile market changes.

Other sales

The revenues from other products sales include revenues from gas sales, and also revenues from sales of goods and services not related to the core activities (agent’s fee, commercial concession and other goods and services).

In the first half of the year 2011 other revenues as compared to the same period in 2010 increased by 23% up to USD  47 million.

COSTS AND EXPENDITURES

In the accounting period as compared to the same period in 2010, the operating expenses of the Group of companies “RussNeft” grew by 39% and made USD  3 751 million.

The key factors of operating expenses growth are the increase in production and operating costs (by 20%), taxes (including Mineral Extraction Tax by 59%),  and also export duties (by 44%).

Production and operating costs

USD  mln.

During the accounting period

During the same period last year

Changes,%

oil and gas production costs

520

402

29%

oil processing costs

(including purchase of oil from the third parties)

413

372

11%

miscellaneous expenditures for oil and gas

11

12

-8%

Total

944

786

20%

The costs for oil production and processing excluding the taxes have increased by 20% and made USD  944 million.

The unit costs for oil production have increased by 24% and made USD  79/per ton.

 The cost development is explained by the increase in tariff for electrical power, the increase of the number of geological and technical measures and the strengthening of the ruble against the US dollar.

 

the 1st half of

2010

the 1st half of

2011

changes

oil production costs (USD  mln.)

402

520

29%

unit costs for oil production (USD /per ton.)

64

79

24%

The oil production costs grew by 11% and made USD  413 million. The main reason for the increase in expenses was the growth of actual cost on oil from the third parties, which is a significant component of the key figures.

The unit costs per ton of the processed oil made USD  165/ per ton as compared to USD  127/ per ton in the first half of 2010.

 

the 1st half of

2010

the 1st half of

2011

changes

processing costs (USD  mln.)

372

413

11%

unit costs for processing (USD /per ton)

127

165

30%

Other operating costs decreased by 8% and made USD  11 million in the first half of 2011.

Taxes other than profits tax and export duties

During the first half of the year 2011 the expenditures connected with taxes (including Mineral Extraction Tax), excluding the profits tax, grew by 59% as compared to the same period last year, and made USD  861 million. The growth of tax liabilities is conditioned by the growth of Mineral Extraction Tax, which in its turn is directly dependent on the growth of oil prices. 

USD  mln.

During the accounting period

During the same period last year

Changes,%

Taxes other than profits tax

861

541

59%

export duties on oil

1 095

693

58%

export duties on oil products

271

258

5%

Total export duties

1 366

951

44%

OIBDA, OPERATING PROFIT AND NET PROFIT

FOR THE 1ST HALF OF THE YEAR 2011  

 

USD  mln.

mln. rubles

Operating profit

781

22 392

OIBDA

927

26 581

Net profit

661

19 068

During the 1st half of the year 2011 the operating profit grew by 47% and made USD  781 million. The OIBDA index grew by 43%, herewith the basic constituents of the key figures – the revenues and costs – essentially grew in percentage ratio: by 33% and 32% respectively, which in absolute terms gave a significant increase, and following the results of the first half of the year 2011 the OIBDA index made USD  927 million.

The net profit grew by 33% as compared to the 1st half of the year 2010 and made USD  661 million.

FINANCING COSTS AND DEBT

USD  mln.

as of 30.06.2011

as of 01.01.2011

changes,%

Total accruals

5 442

6 211

-12,4%

The reduction of debt load of the Holding by 12, 4 % in the 1st half of the year 2011 as compared to the same period in 2010 has occurred as a result of the efficient production and operating activities of the Company, as well as the earmarking of funds received from the sale of a number of refining and marketing assets of the Holding, on repayment of loans.

CASH FLOW

 ( USD  mln.)

During the accounting period

During the same period last year

Changes,%

Opening balance

141

127

11%

Cash flow from operating activity

787

458

72%

Cash flow from investment activity

194

-120

261%

Cash flow from financing activity

-1 046

-372

181%

Ending balance

76

93

-19%

Following the results of the 1st half of the year 2011, after the accomplishment of the investment program and performance of service on credit portfolio, the undistributed cash balance of the Company made USD  76 million.

CAPITAL EXPENDITURES

 USD  mln.

During the accounting period

During the same period last year

Changes,%

Production

289

166

74%

Processing

3

2

47%

Miscellaneous

0

1

-82%

Total capital expenditures

292

169

73%

The capital expenditures in the 1st half of the year 2011 made USD  292 million that is by 73% more as compared to the same period in 2010. The capital expenditures connected with production grew from USD  166 million to USD  289 million. The capital expenditures connected with processing made USD  3 million as compared to USD  2 million last year.

The growth of capital expenditures is associated primarily with the implementation of drilling programs (during the 1st half of the year 2011 the funding was two times as much as during the same period in 2010) and the construction of utility networks and infrastructure in the oil fields of the Company.

OIL PRICES

 USD /bbl

During the accounting period

During the same period last year

Changes,%

The average price for Urals oil during the reporting period

108

76

43%

EXCHANGE RATE

 

During the accounting period

During the same period last year

Changes,%

Exchange RUR/USD

28.6242

31.1687

-8%