Rosneft Oil : 2020 Third quarter IFRS (Presentations)
11/13/2020 | 08:49am EST
Rosneft Oil Company
IFRS Results
Q3 2020
November 13, 2020
Important Notice
Information herein has been prepared by the Company. The presented conclusions are based on the general information collected as of the date hereof and can be amended without any additional notice. The Company relies on the information obtained from the sources which it deems credible; however, it does not guarantee its accuracy or completeness.
These materials contain statements about future events and explanations representing a forecast of such events. Any assertion 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 our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting such statements.
This presentation does not constitute an offer to sell, or any solicitation of any offer to subscribe for or purchase any securities. It is understood that nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information herein should not for any purpose be deemed complete, accurate or impartial. The information herein in subject to verification, final formatting and modification. The contents hereof has not been verified by the Company. Accordingly, we did not and do not give on behalf of the Company, its shareholders, directors, officers or employees or any other person, any representations or warranties, either explicitly expressed or implied, as to the accuracy, completeness or objectivity of information or opinions contained in it. None of the directors of the Company, its shareholders, officers or employees or any other persons accepts any liability for any loss of any kind that may arise from any use of this presentation or its contents or otherwise arising in connection therewith.
2
Care for employees
Facing the COVID-19 Challenge:
Priority to People's Health and Well-being
Transition to remote work
Regular testing (>560,000 tests)
Psychological aid hotline
>29.3 mln units of personal protective equipment
Strict compliance with sanitary and epidemiological requirements
>5.8 mln liters of disinfectant for offices and workplaces treatment
Care for operations
Priority Action Plan approved by the Board of Directors to ensure operational stability
Emergency monitoring and response centers in284 subsidiaries
Epidemiological alertness regime in117 rotation camps and 230 shift camps
Rotation period is increasedto 90 days
263 observation roomsfor 21,400 patients and 398 isolation rooms for 13,400 patients
Care for customers
Production of twosanitizer components, ethyl alcohol (ethanol) and acetone
32,300 tons of acetone and 2,700 tons of ethyl alcohol sold on the domestic market
Contactless fuel payment service
Personal protective equipment and financial support for medical institutions
3
The Company's Progress in Sustainable Development is Reflected in Designated International ESG Ratings
Note: (1) Monthly averages, (2) Calculated as Urals price less export customs duty and effective MET rate
6
Key Events
1
New tax initiatives for the Russian oil and gas
sector were approved1
2
Tightened cost control.
Unit lifting costs reduced to $2.8 per bbl
3
Despite continued pressure from external factors,
Q3 EBITDA exceeded the pre-crisis Q1 level
4
The Company generated positive free cash flow
and continued to reduce debt
Over 80 mln shares and GDRs for a total of
5 c. $370 mln have been purchased under the share buyback program2
Note: (1) Come into force starting January 1, 2021, (2) Since the start of the Program as of November 6, 2020
7
Impact of New Tax Initiatives
CONTENT
SUBJECT
Cancellation of tax
Cancellation of MET relief
benefits for depleted
Option to switch to EPT provided (Group 3)
с. 57 mmt of crude produced at depleted fields in 2019
fields with an option to
subject to reduced MET rate
Provision of a 20% MET relief starting 2024
switch to EPT regime
Cancellation of tax
Russkoye,
benefits for high-vicious
Zero/reduced MET and export duty rates were replaced
oil and export duty
by the standard ones, an option to switch to EPT
Vostochno-Messoyakhskoye
holidays for certain
provided
Srednebotuobinskoye fields
projects
Introduction of an increased MET coefficient for the
Prirazlomnoye field
Revision of the EPT
fields included in Group 2
> 27 mmt of crude produced in 2019 at fields
parameters
Tax deductible historical costs, operating and capital
transferred to the EPT regime
expenses were limited
Reduction of the cut-off price for the MET deduction to
Vankor cluster - funds for the construction of the Vostok
$25/bbl Urals, zero MET period for greenfields
MET deduction for
Oil project infrastructure
extended to 16 years
certain projects
Provision of a MET deduction for the implementation of
Priobskoye field - up to Rub 460 bn (until 2032) to
finance the field development
an investment agreement
mixed impact
negative impact
positive impact
8
Operating Results
9
Key Operating Indicators
Liquids production,
kbd
4,674
4,0363,908
4,193
Q2'20 / Q3'20
9M'19 / 9M'20
Gas production, mmcmd
Refining throughput,
mmt
166.6162.6
182.2170.6
Q2'20 / Q3'20
9M'19 / 9M'20
7.31
8.22
74.59 69.96
2.51 2.94
21.49 22.52
Q2'20
Q3'20
9M'19
9M'20
in Russia
abroad
10
Navigating OPEC+ Environment
Crude oil production in Russia (2020), mmbd
6
11
Stage 2
Stage 1
5
9
4
7
3
5
2
3
jan feb mar apr may jun jul aug sep oct nov dec
The Company has started oil production cuts under the new OPEC+ agreement since May 2020
Production cuts on a pro rata basis
Stage 1 extended till the end of July 2020
Easing of restrictions starting August until December 2020 under Stage 2
Rapid production recovery in Stage 2 - a 6% increase already in early August
Commitment to successful execution of the chosen approach to cut production:
Asset selection (to cut production) is based on economic efficiency
Continued development of new fields
Efficient long-cycle wellworks to be continued according to schedule
Efficient well stock management
Rosneft (LHS)
Russia total (RHS)
11
Development of Key Oil Projects
Severo-Komsomolskoye field
Lodochnoye field
3Р (PRMS) reserves - 269 mmtoe1
The implementation of the 1st stage of full-scale field development (PK-1 horizon) has begun
Development drilling is in progress, 51 wells have been drilled as of September 30, 2020
Engineering preparation of the main facilities sites for the full-scale development of the field is underway
3Р (PRMS) reserves - 85 mmtoe
Pilot development programs are being implemented with connection to the facilities of the Vankor field
Development drilling is in progress, 41 well have been drilled as of September 30, 2020
Construction and installation work is underway at infrastructure facilities and oil and gas processing facilities
YaNAD
KhMAD
Erginskiy LA
3Р (PRMS) reserves - 89 mmtoe
Launch - Q3 2020, production plateau - ~4.5 mmt (2024)
Development drilling is in progress at 10 pads, 199 wells have been drilled as of September 30, 2020
A 79 km pressure pipeline welding is completed, the pipeline was put into operation, shipping of commercial oil to the Transneft system began
Construction of infrastructure facilities, pads, infield pipelines and electric power transmission lines is underway
Irkutsk
Region
Severo-Danilovskoye
3Р (PRMS) reserves - 101 mmtoe2
Launch - Q4 2020, production plateau - ~2 mmt2 (2024)
95 well to be drilled, 13 wells have been drilled as of September 30, 2020. The majority of wells will be horizontal
A 4 MW mobile power center was put into operation. The welding of the oil pipeline to the Verkhnechonskoye field is completed, preparatory work for hydraulic tests is underway
Construction of pads, infrastructure facilities and motor roads is underway
Note: (1) Reserves volume of the entire field; (2) Reserves volume and production plateau of the entire field
12
Gas Business
Gas production in Russia, bcm
(OPEC+ impact is limited by the amount of associated gas)
-8.1%
-5.2%
Decrease of
production in Russia
Decrease of the
46.0
Company's production
43.6
9M 2019
9M 2020
Gas sales volumes and average price
4.18
4.16
Average price
('000 Rub/mcm)
45.72
41.15
Volume (bcm),
3.65
including.:
3.15
Outside Russia
9M 2019
9M 2020
Gas sales revenues, Rub bn
191.3
171.0
9M 2019
9M 2020
The Company's 9M 2020 gas production declined by
5.2% (YoY) compared to 8.1% total reduction in Russia1
The main growth driver is the Rospan project, which provides the largest incremental production increase for both gas and liquids
Projects development at Sibneftegaz and Kharampurneftegaz fields is in active phase
According to the Federal Antimonopoly Service gas prices for industrial consumers and citizens have been increased by 3% starting August 1, 2020
Decrease of revenues was caused by demand reduction following warm weather conditions as well as external factors that negatively influenced end consumers
Note: (1) Gas extracted less gas flared
13
Refining
Refining margins1, $/tonne
68.3
63.3
46.7
38.7
30.4
19.4
14.0
-24.8
-20.8
-11.7
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Europe
Russia
Key product prices less cost of feedstock, Russian refineries1, $/tonne
300
30
100
10
-100
-10
-300
-30
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Diesel
Fuel oil
Gasoline
Refining margin (RHS)
Negative refining margin in Russia in Q3 2020 was caused by poor market environment:
Crude oil prices recovery
Decrease of wholesale prices starting August
Damper effect that remained in the negative zone. While its figure was better than in Q2 2020 providing positive margin dynamics in Q3
Negative refining margin dynamics outside Russia in Q3 2020 was caused by crude oil prices recovery and reduction of key petroleum product crack spreads
Product output (mmt)
29.3
27.7
28.0
24.8
23.5
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Diesel
Fuel oil
Gasoline
Other
Outside Russia
Russia
Note: (1) Including the reverse excise tax on crude and damper for motor fuels. Prices for petroleum products are calculated «at the refinery gates»
14
Focus on Distribution Channels Development
Netbacks of the main crude oil marketing channels, $/tonne
Export, Asia
Export, Europe
Refining in Russia
Domestic market
420
340
260
180
100
Q1'19
Q2'19
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
In Q3 2020 crude oil supplies to non-CIS countries amounted to
mmt, including crude oil supplies eastwards that reached
mmt, i.e. 55.3% of total sales to non-CIS countries
In Q3 2020 crude oil exports to non-CIS countries amounted to
mmt while the share of 1+ years term contracts amounted to over 90%
In Q3 2020 motor fuel sales via the exchange exceeded the required level by 3x times
Crude oil marketing breakdown, mmt
66.3
50.6
49.2
Export, West
24%
22%
21%
29%
26%
Export, Asia
29%
4%
Export, CIS
4%
4%
3%
3%
Domestic market
2%
Refining in Russia
41%
42%
46%
Q3'19
Q2'20
Q3'20
15
Financial Results
16
Key Financial Indicators
366Rub bn
Q3 2020 EBITDA
+18% vs.
pre-crisis Q1
352 9M 2020 free cash flow
Rub bn
-5.7
Reduction of debt and trading
$ bn
liabilities YTD
17
EBITDA and Net Income Dynamics
EBITDA Q3 2020 vs. Q2 2020, Rub bn
Q2 2020
170
Exchange rate
26
Crude oil price
157
Share in profits
14
of associates and JVs
Export duty lag
(8)
Other taxes
4
Number of days
6
Damper andMET rates
30
Change in volumes
(7)
Effect of provision
(23)
recovery in Q2 2020
OPEX
(9)
General costs
7
Exploration costs
(1)
Q3 2020
366
Net Income Q3 2020 vs. Q2 2020, Rub bn
Net income
43
attr. to shareholders
Q2 2020
2
Minorities
Q2 2020
45
EBITDA
196
DDA
Financial
expenses (net)
Other costs
Pandemic costs
Income tax
FX gains/losses
(282)
Q3 2020
(50)
Minorities
14
Net income
(64)
attr. to shareholders
Q3 2020
5
(29)
(5)
(1)
21
Costs Dynamics
Lifting costs, Rub/boe
Quarter
LTM average
% YoY
200
201
191
208
205
196
4.1%
2.5%
2.0%
-4.4%
-2.1%
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
General and administrative costs1, Rub/boe
Quarter
LTM average
% YoY
90
82
90
73
74
64
15.6%
2.3%
-8.2%
-3.9%
-21.0%
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Refining costs in Russia, Rub/bbl
Quarter
LTM average
% YoY
209
226
220
207
184
181
22.8%
2.2%
2.3%
-1.1%
0.0%
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Producer Price Index (annual basis), %
-0.6%
-5.6%
-1.7%
-11.6%
-1.4%
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Note: (1) Excluding provisions
19
Strong Free Cash Flow
Free cash flow calculation, Rub bn
Crude oil price and free cash flow dynamics, LTM
Net cash provided
by operating activities
Reimbursement of
prepayments received
(historical FX rate)
625
217
4.25
4.11
Reimbursement of
other financial obligations
116
3.85
FX rate change effect
Interest on prepayments
Net change in operations
of subsidiary banks
Prepayments for
future supplies
Reimbursement of
prepayments granted
Adj. operating cash flow
CAPEX
Free cash flow
111
3.33
3.14
29
(180)
12
920
941
931
798
634
(9)
921
(569)
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
352
Free cash flow, Rub bn
Urals price, '000 Rub/bbl
20
Debt Optimization
Liquidity position as of September 30, 2020, $ bn
Financial debt breakdown as of September 30, 2020
19.3
Available credit lines
10.5
Liquid financial assets
31%
Rubles
Foreign currencies
48%
52%
Floating rates
Fixed rates
69%
Short-term financial
Available liquid
assets
assets
Gross debt and trading liabilities dynamics, $ bn
CBR key rate and LIBOR
YTD
7.75%
7.50%
2.81%
6.25%
2.34%
4.50%
4.25%
1.91%
0.30%
0.23%
-5.7
31.12.2018
30.06.2019
31.12.2019
30.06.2020
30.09.2020
Gross debt
Prepayments
Total
CBR key rate (LHS)
3M USD LIBOR (RHS)
21
CAPEX
CAPEX evolution, Rub trln
0.85
0.63
0.57
9M 2019
2019
9M 2020
2020
Plan
Revision of CAPEX, Rub trln
Following negative macro environment and production cuts the CAPEX program was optimized by 20%
The program still allows for fast project development recovery and production buildup whenever the market conditions change / production restrictions will be lifted
~1
Optimization in
Russia c. 0.2
2020
Upstream Downstream
Other
2020
Plan
Revised
Key areas for optimization
Postponing/eliminating less economically viable projects
Rising hurdle rates for certain groups of projects
Maintaining active pre-investment work on high- margin perspective projects
Note: (1) Adjusted for FX gains/losses and other one-off effects; (2) Adjusted for prepayments under long-term crude oil supply contracts (including accrued interest), net change in
25
operations of subsidiary banks and operations with trading securities (Rub equivalent)
EBITDA and Net Income Dynamics
EBITDA 9M 2020 vs. 9M 2019, Rub bn
Net Income 9M 2020 vs. 9M 2019, Rub bn
9M 2019
Exchange rate
Tax maneuver
completion
EPT effect
Crude oil price
Share in profits of
associates and JVs
Export duty lag
Transport tariffs
indexation
Damper and MET rates
Other taxes
Change in volumes
Recovery of provision accumulated in 2019
Sales mix and margin (trading)
OPEX and general costs
Exploration costs
Other
9M 2020
845
1,617
103
(36)
32
(456)
(40)
(58)
(13)
(200)
(10)
(169)
58
32
(6)
(4)
(5)
Net income
attr. to shareholders
9M 2019
Minorities
9M 2019
EBITDA
DDA
9
Financial expeses (net)
(26)
Other income
(3)
Other costs
42
Pandemic costs
(5)
Income tax
161
FX gains/losses
(180)
9M 2020
(148)
Minorities
29
Net income
(177)
attr. to shareholders
9M 2020
550
76
626
(772)
26
Calculation of Adjusted OCF
Profit and Loss Statement
№
Indicator
9M 2020,
$ bn
1
Revenue, incl.
62.6
Reimbursement of prepayments and other
6.3
financial obligations received
2
Costs and expenses, incl.
(57.4)
Reimbursement of prepayments granted
(0.1)
3
Operating profit (1+2)
5.2
4
Expenses before income tax
(7.2)
5
Income before income tax (3+4)
(2.0)
6
Income tax
0.3
7
Net income (5+6)
(1.7)
Cash Flow Statement
9M 2020,
Indicator
№
$ bn
(1.7)
Net income
1
7.0
Adjustments to reconcile net income to cash
2
flow from operations, incl.
Reimbursement of prepayments received
(4.6)
under crude oil and petroleum products supply
contracts
(1.7)
Reimbursement of other financial obligations
received
Reimbursement of prepayments granted
0.1 under crude oil and petroleum products supply contracts
4.3
Changes in operating assets and liabilities, incl.
3
(0.4)
Interest on prepayments under long- term
crude oil supply contracts
(0.3)
Income tax payments, interest and dividends
4
received
9.3
Net cash from operating activities (1+2+3+4)
5
(2.7)
Net change in operations of subsidiary banks
6
0.2
Prepayments for future supplies
7
6.6
Effect from prepayments
8
13.4
Adjusted operational cash flow (5+6+7+8)
9
27
Finance Expenses, Rub bn
Indicator
Q3 2020
Q2 2020
%
9M 2020
9M 2019
%
Interest accrued1
Interest paid and offset2
Change in interest payable (1-2)
Interest capitalized3
Net loss from operations with financial derivatives4
Increase in provision due to the unwinding of a discount
Interest on prepayments under long-term oil and petroleum products supply contracts
Change in fair value of financial assets
Increase in loss allowance for expected credit losses on debt financial assets
10. Other finance expenses
Total finance expenses (1-4+5+6+7+8+9+10)
66
63
4.8%
194
215
(9.8)%
64
60
6.7%
190
211
(10.0)%
2
3
(33.3)%
4
4
-
32
32
-
100
121
(17.4)%
3
(4)
-
6
-
100.0%
6
6
-
18
14
28.6%
8
9
(11.1)%
29
56
(48.2)%
(1)
(20)
(95.0)%
1
-
100.0%
4
-
100.0%
5
3
66.7%
1
3
(66.7)%
7
9
(22.2)%
55
25
120.0%
160
176
(9.1)%
Note: (1) Interest accrued on credits and loans and other financial obligations, (2) Interest is paid according to the schedule, (3) Interests paid shall be capitalized in accordance with IAS
23 standard Borrowing Costs. Capitalization rate is calculated by dividing the interest costs for borrowings related to capital expenditures by the average balance of loans. Capitalized
interest shall be calculated by multiplying average balance of construction in progress by capitalization rate, (4) Net effect on operations with financial derivatives was related to FX
28
component fluctuations of cross-currency interest rate swaps.
Variance Analysis
9M 2020 EBITDA and net income sensitivity to +/- 10% change in Urals price, Rub bn
EBITDA
(113)113
Net income
90
-10%
40.8
+10%
$/bbl
9M 2020 EBITDA and net income sensitivity to +/- 10% change in Rub/$ exchange rate, Rub bn
OAO Neftyanaya Companiya ROSNEFT published this content on 13 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 November 2020 13:48:05 UTC
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