Page 130 - RusRPTMar21

costs excluding DD&A fully matched our forecast. The company showed lower than expected materials and G&A, as well as exploratory expenses and purchase costs, and the inventory effect. This was partly offset by higher than anticipated transportation costs and property tax. The marginal outperformance on revenues, together with decent cost control, translated into EBITDA being 5% ahead of our forecast and 3% above consensus, at $888mn (down 10% y/y, when adjusted for other loss and exceptional gains of 4Q19).
Unrecognised share of JV loss brought forward. Below the operating level, the company reflected $211mn of income from associates (including a $0.36bn of a portion of unrecognised loss on Yamal LNG brought forward from the previous reported periods due to significant adverse FX changes) and an FX loss of $315mn.
It is important to note that the remaining part of the unrecognised loss on Yamal LNG (roughly the same amount) might be written-off in 1Q21 and therefore decrease the earnings of the corresponding period.
The resulting headline net income for the quarter came in at $574mn, down 18% y/y, 5% ahead of us but 5% below consensus. At the same time, normalised net income was notably above our forecast due to a combination of higher income from associates and a greater change in the unrecognised share of the JV loss, as well as the greater than expected FX loss (for, which the company adjusts net income).
The normalised net income of $768mn for 4Q20 implies DPS of RUB27.84 for 2020 under the assumption of a 50% payout for FY20. This number includes the RUB11.82/share already paid for 1H20 and translates into 2.1% 2020F DY. FCF for 4Q20 came close to zero ($26mn), missing our forecast by $0.2bn due to a significant ramp-up in capex to $0.75bn (vs. our forecast of $0.44bn). The results as somewhat positive on the higher-than-anticipated dividends, although analysts doubt this warrants a market reaction, given that the dividend yield remains quite low.
Novatek reports that it has sold 100% of Chernichnoye LCC to Terneftegas, its joint venture with Total (51% held by Novatek) for RUB730mn ($9.6mn). This was associated with a RUB69mn gain for 4Q20. Chernichnoye LCC holds the licence to explore and develop the Chernichnoye licence area in YaNAO. According to Vedomosti, the area’s reserves are 179mmboe. It was acquired by Novatek in 2018 for RUB616mn. Separately, Novatek disclosed that it had signed its first long- and medium-term LNG sales agreements for Arctic LNG 2 with European and Asian clients. Negotiations and further marketing efforts are ongoing.
Novatek has entered into a long-term agreement to supply LNG to
130 RUSSIA Country Report March 2021 www.intellinews.com