Page 129 - RusRPTMar21

disclosed that it is to pay RUB 716bn (USD 9.6bn) to NNK (RUB 615bn already paid) in cash for these assets. Separately, the company also recorded a RUB 4.3bn impairment loss from the sale of ‘tail assets’ to NNK. The strong earnings this quarter helped to push headline net income into positive territory for the full year at USD 2.0bn, which implies a RUB 6.94 DPS for 2020 (1.4% DY). Rosneft also recognised a RUB 1,004bn (USD 13.2bn) long-term prepayment in 4Q20.
Cost growth outpaces revenue. The top line rose 2% QoQ to USD 20.0bn, just marginally missing our and the consensus forecasts. On the cost side, the company showed good upstream cost control, with opex per bbl growing just 1.4% YoY (and -2.9% QoQ) in roubles. However, refining and other operating costs came above our forecasts, rising 15% QoQ and 130% QoQ, respectively. SG&A were seasonally high (+40% QoQ), above our estimate. Non-income taxes were flattish QoQ. Overall costs were up 4% QoQ. This led to EBITDA declining 6% QoQ to USD 4.1bn, 6% below us and 11% below consensus.
Gain from Taimyrneftegas acquisition brings FY20 net income above zero. Below the operating level, the company reported a USD 0.8bn FX gain. Rosneft also recorded a USD 6.6bn gain from the acquisition of assets of Taimyrneftegas, which are now part of Vostok Oil, from NNK. The company is to pay RUB 716bn (USD 9.6bn) to NNK (RUB 615bn already paid) in cash for Taimyrneftegas and its subsidiaries. However, simultaneously the company reported a USD 4.3bn impairment loss from the sale of ‘tail assets’ to NNK. All in all, the company showed USD 2.1bn of net other income, which pushed earnings to USD 4.3bn this quarter, more than sufficient to offset 9mo20 losses. Thus, FY20 net income came in at USD 2.0bn. Under the dividend policy, this translates into DPS of RUB 6.94 for 2020, a 1.4% DY. FCF (excl. WC and prepayments) was strong, at USD 2.3bn (vs. our estimate of USD 0.7bn) with USD 2.8bn capex (we expected USD 3.3bn).
● Novatek
Novatek's 4Q20 IFRS results came largely in line with what we had expected on revenues, but 5% and 3% ahead of us and consensus on EBITDA. Net income was 5% above our forecast but missed consensus by 5%. Notably, Novatek’s normalised net income implies RUB27.83 DPS for 2020F under a 50% payout for FY20 (including the RUB11.82/share already paid for 1H20).
Slightly better revenues, decent cost control. Revenues were down 17% y/y and largely in line with our forecast, at $2.88bn (a mere 2% above us, due to the slight outperformance from oil and gas revenues and somewhat better than expected other revenues). Overall operating
129 RUSSIA Country Report March 2021 www.intellinews.com