Page 5 - FSUOGM Week 31 2021

FSUOGM COMMENTARY FSUOGM

Novatek CFO Mark
Gyetvay.

contributed the remaining 95%. of last year.
Like many figures in industry, the CFO took Novatek’s earnings also benefitted from a
issue with the International Energy Agency fall in capital expenditure to RUB47.4bn from
(IEA)’s recent net-zero 2050 roadmap report. RUB61.3bn. Free cash flow (FCF) came in strong
Among its conclusions, the report stated that if at RUB104bn, up from negative RUB57bn a year
the world continues on its pathway towards net- earlier.
zero emissions by the middle of the century, no “We achieved a very good set of financial
further investment in oil and gas production is and operational results in Q2 2021 and H1 2021
needed. because of a strong commodity pricing envi-
The report “opened some serious debates on ronment and an extended cold winter season,
the credibility of its content and the cost to soci- as well as growth in sales volumes both domes-
ety to make such a radical shift to renewables,” tically and internationally,” Gyetvay explained.
Gyetvay said. “Natural gas and crude oil benchmarks recov-
Despite its new environmental initiatives, ered significantly from their pandemic-driven
Novatek has no plans to scale back production. lows and look poised to remain relatively strong
Quite the opposition, it aims to ramp up its LNG throughout the remainder of 2021.”
supply to up to 70mn tonnes per year by 2030, up The CFO said Novatek’s capital expenditure
from 20mn tpy at present. this year was still on track to hit RUB200bn,
“We clearly understand the challenges ahead and the company is also predicting a 3% growth
of us and the need to focus on the energy transi- in full-year gas output and a 1% increase in oil
tion, but we don’t fully subscribe to some of the production.
main points raised in the special report,” Gyetvay LNG spot prices surged this year as the mar-
said. “As a large global gas producer, we don’t see ket tightened, and Novatek did its best to capital-
a future world where natural gas does not play a ise on this trend by selling 36% of Yamal LNG’s
key role in the decarbonisation process, or con- volumes on the spot market, while the rest was
versely, a world where 90% of future electricity delivered under long-term contracts, Gyetvay
generation is powered by renewables as noted in said. But annual schedules already agreed with
the report." customers and various other factors restricted
how much spot LNG it could market.
Strong numbers Novatek also noted that the fourth 0.9mn
Like many oil and gas producers, Novatek tpy train of its Yamal LNG plant had produced
enjoyed strong numbers in the second quar- 38,000 tonnes of LNG since its launch in June,
ter, with its profit doubling year on year to when the company tested 80% of its capacity. It
RUB99.3bn ($1.35bn), primarily on the back of aims to raise capacity utilisation to 100% in the
higher gas prices. autumn, and monitor the unit’s Arctic Cascade
The company’s revenues surged to over the next 12-18 months to see how it per-
RUB264.5bn in the three months ending June 30, forms. The 19.8mn tpy Arctic LNG-2 project is
from RUB143.9bn a year earlier, while EBITDA 45% complete, Gyetvay said.
more than doubled to RUB163.2bn from Novatek had been hoping to grow its oil pro-
RUB71.3bn. Besides bullish prices, Novatek also duction sooner but was prevented from doing
gained from a growth in its hydrocarbon pro- so because of OPEC+ restrictions. As those
duction to 1.72mn barrels of oil equivalent per restrictions are easing, though, plans to launch
day in the period, compared with 1.6mn boepd the Kharbeyskoye oilfield in early 2023 are back
in Q2 2020. This was mainly thanks to the launch on track. The field is expected to flow 1mn tpy
of the North-Russkoye fields in the third quarter (20,000 barrels per day) of oil at full capacity. ™

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