Page 135 - RusRPTMar21

moving for now. The acquisition amount makes up 3% of Lukoil’s 2021F capex, on our numbers.
The potential acquisition (were it to materialise) might add upside risks to our capex forecast of $6.1bn for 2021F, we believe (the company’s strategy suggests $7bn of capex in the upstream segment only).
● Other
Bashneft has published its 4Q20 results. We anticipated them being quite weak, but they came lower then our expectations, with EBITDA missing our forecast by 22%.
We note that Bashneft is more exposed to refining (as opposed to crude oil sales) than any other integrated oil company in Russia, and the final quarter of last year was not favourable for the downstream segment, especially domestically in Russia. The bottom line miss was exacerbated by other expenses and an FX loss. The FY20 net loss came in at negative $154mn. Therefore, dividends are unlikely to based on the official policy.
Downstream drives revenue decline. Revenues were down 11% q/q at $1,529mn. We note that Bashneft’s Ufa refinery was under maintenance for part of 4Q20, which resulted in refining output being down 11% compared with 3Q20. Additionally, domestic product prices in $in Russia declined q/q. Being more exposed than any other integrated oil company to refining (as opposed to crude oil sales), Bashneft was unable to offset the loss of downstream revenues through higher crude sales. Hence, the revenue decline came as expected, but the scale was somewhat greater, as revenues missed our expectations by 4%.
FX loss and other expenses widen the net drop . On the cost side, the company showed flat q/q (in $terms) operating expenses, while we expected a decline. Non-income taxes (-16% q/q) came in line with us. Bashneft’s transport and SG&A expenses were down 5% and 8% q/q, although we anticipated the company making greater cost cuts. At the same time, we had expected higher crude and product purchase expenses (-8% q/q). The resulting EBITDA of $108mn was down 31% q/q and 22% below our forecast. Below the operating level, the company reported a $28mn FX loss (vs. $37mn expected by us) and $51mn of other expenses (mostly driven by social payments and charity, $41mn). As a result, Bashneft’s 4Q20 bottom line was a $94mn loss. This brought the FY20 net loss to $154mn. Thus, the company is unlikely to pay dividends for 2020 if it follows the official dividend policy (25% payout of IFRS net income).
135 RUSSIA Country Report March 2021 www.intellinews.com