Rosneft: Financial and operating results for Q2 2015:
Consolidated IFRS financial results for Q2 2015 and H1 2015:
| Q2 2015 | Q1 2015 | Change, % | Н1 2015 | Н1 2014 | Change, % | |
| Financial results | RUB bln (except %) | |||||
| Revenues | 1,312 | 1,288 | 1.9% | 2,600 | 2,810 | (7.5)% |
| EBITDA | 311 | 265 | 17.4% | 576 | 593 | (2.9)% |
| Adjusted EBITDA1 | 326 | 286 | 14.0% | 612 | 593 | 3.2% |
| Adjusted EBITDA margin | 24.8% | 22.2% | 23.5% | 21.1% | ||
| Net income | 134 | 56 | 139.3% | 190 | 257 | (26.1)% |
| Adjusted net income2 | 134 | 56 | 139.3% | 190 | 212 | (10.4)% |
| Adjusted free cash flow | 210 | 130 | 61.5% | 340 | 233 | 45.9% |
| USD bln3 (except %) | ||||||
| Revenues | 25.2 | 21.0 | 20.0% | 46.2 | 80.3 | (42.5)% |
| EBITDA | 6.3 | 4.5 | 40.0% | 10.8 | 16.9 | (36.1)% |
| Adjusted net income2 | 2.5 | 1.0 | 150.0% | 3.5 | 5.9 | (40.7)% |
| Gross debt | 54.3 | 56.0 | (3.0)% | 54.3 | 65.7 | (17.4)% |
| Net debt | 39.9 | 43.3 | (7.9)% | 39.9 | 45.34 | (11.9)% |
| Adjusted free cash flow | 4.2 | 2.5 | 68.0% | 6.7 | 6.7 | ? |
| For reference | ||||||
| Average Urals price, USD per bbl | 61.8 | 52.8 | 17.0% | 57.3 | 107.1 | (46.5)% |
| Average Urals price, th.RUB per bbl | 3.25 | 3.28 | (1.0)% | 3.29 | 3.75 | (12.2)% |
| Operating results | ||||||
| Hydrocarbon production (thboed) | 5,149 | 5,200 | (1.0)% | 5,175 | 5,075 | 2.0% |
| Refinery throughput (mmt) | 23.75 | 24.34 | (2.4)% | 48.09 | 48.49 | (0.8)% |
| Crude oil, petroleum products and petrochemicals sales (mmt) | 53.40 | 52.80 | 1.1% | 106.20 | 104.60 | 1.5% |
| Gas sales (bcm) | 13.27 | 15.93 | (16.7)% | 29.20 | 25.76 | 13.4% |
1 Adjusted for forex effect from the recognition of revenue under long term oil supply contracts in the amount of RUB 15 bln in Q2 2015 and RUB 21 bln in Q1 2015.
2 Excluding gain from the sale of LLC "Yugragazpererabotka" of RUB 45 bln (net result) (USD 1.3 bln at average March 2014 exchange rate) in Q1 2014.
3 Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.
4 Revised data.
In commenting the results of H1 2015, I.I. Sechin, Chairman of Rosneft Management Board, said:
«The period of H1 2015 was characterized by high fluctuation of oil price and exchange rate, increased transportation tariffs and tax burden, high interest expenses due to change in interest base rate. In these conditions the Company undertaken efforts on maintaining current production capacity with continued program aimed at optimization of operational, administrative costs and capital expenses and setting priorities to financing of new projects development. Thus, the Company demonstrated better dynamics of revenues, EBITDA and adjusted net income in H1 2015 compared to H1 2014 taking into consideration change in average oil prices (both in RUB and US dollar term)».
Operational performance
Upstream
In Q2 2015 production of hydrocarbons reached 63.3 mmtoe (5.15 mboed average daily production of hydrocarbons) that enabled production growth in H1 2015 by 2.0% compared to H1 2014. Increased production of hydrocarbons was achieved by additional wellworks, drilling of new wells and implementation of new technologies with simultaneous optimization of expenses.
For H1 2015, the Company increased its production drilling meterage by more than 30% compared to H1 2014 and put into use more than 800 new wells. The drilling structure becomes more complex, in that way the number of horizontal wells in H1 2015 exceeded 30% of the total volume of production drilling (over 260 wells). As of current mid-year in-house rigs fleet achieved 215 units and workover crews - 203.
In Q2 2015 the Company put into production Protozanovskoe field with over 13 mmt of crude oil recoverable reserves (ABC1+C2). Based on this field the Company intends to create a new center of development of Uvat project – Protozanovsky hub. This will enable the development of 6 fields with over 48 mmt of crude oil and condensate recoverable reserves (ABC1+C2).
The Company successfully completed drilling of the most extended worldwide well at Chaivo field. World’s largest depth of the well is 13,500 m and horizontal reach is 12,033 m.
Based on performance in H1 2015 production of gas reached 31.09 bcm, having increased by 16.4% compared to H1 2014. The level of utilization of accompanying petroleum gas reached 87% in H1 2015 compared to 77% in H1 2014.
To improve the efficiency of exploration and production asset portfolio the Company signed an agreement with BP to sell 20% share in «TAAS-Yuryakh Neftegazodobycha» in June 2015 and already received an advance payment of RUB 8 bln. This agreement will accelerate project delivery.
Downstream
In H1 2015, Russian and foreign refineries of the Company have refined 48.09 mmt of crude oil. Slight decrease in processing level (by 0.8%) compared to H1 2014 was due to temporary cease of processing at Mozyr refinery under processing agreement in Q1 2015 accompanied by re-allocation of crude oil to higher marginal trading channels in Q1 2015.
In H1 2015 sales volumes of crude oil and petroleum products increased by 1.5% compared to H1 2014 up to 106.2 mmt including suppliers under long-term contracts providing for long-term prepayments in the amount of 12.8 mmt.
Growth of gas sales volumes of 13.4% in H1 2015 compared with H1 2014 was due to increased suppliers under new long-term contracts. The average selling price increased by 4.7% compared with H1 2014.
In terms of strategy of processing development and increasing worldwide market representation the Company in cooperation with BP partner signed main reorganization conditions of Ruhr Oel GmbH and agreed to acquire 16.67% effective stake in PCK Raffinerie GmbH from Total. Such measures enable the Company to strengthen its position on the European market of petroleum products.
In July 2015 the Company and Essar signed a long-term contract for oil supplies. The contract envisages total supplies of 100 mmt of crude oil over a period of 10 years. Besides, the Company and Essar signed key terms of participation in refinery in Vadinar city, one of the biggest refineries of India and Asia-Pacific and retail network of 1600 petrol stations in India with a stake of up to 49%. Signed document will allow the Company to increase the profitability of operations across the value chain and open up new prospects for trading development in the Asia-Pacific region.
Financial performance
In Q2 sales proceeds amounted to RUB 1,312 bln (USD 25.2 bln) and increased by 1.9% compared to Q1 2015 due to growth of crude oil export volumes and optimization of trading channels despite the decrease in crude oil prices in RUB terms.
In Q2 2015 the Company remained influenced by negative effect from change in oil industry tax rates. Negative effect from increase in mineral extraction tax (RUB -236 bln) in H1 2015 compared with H1 2014 partially compensated by decrease in customs duties and increased domestic market prices. Change in oil industry tax rates had impact totaling RUB 37 bln for the period.
Thanks to measures on cost optimization and control adjusted earnings before interests, tax and depreciation (EBITDA) amounted to RUB 326 bln (USD 6.3 bln) and increased by 14.0%, adjusted EBITDА margin reached 24.8% in Q2 2015 compared to Q1 2015. Adjusted EBITDA for the H1 2015 increased by 3.2% compared to H1 2014 up to RUB 612 bln.
In Q2 2015 net income increased up to RUB 134 bln (USD 2.5 bln) and amounted to RUB 190 bln in H1 2015.
The positive free cash flow reached RUB 340 bln in H1 2015 increasing approx. by 1.5 times. This allowed the Company to reduce its debt burden and to pay dividends of 2014 in the amount of RUB 87 bln. In Q2 2015 the Company made an early repayment of two syndicated loans, raised in 2011-2012 by the former TNK-BP Group, in the amount of RUB 30 bln, including interest. Net debt in dollar term decreased by 9.0% starting the year.
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