Page 97 - RusRPTAug19

term contracted prices (which are partly linked to oil prices). ● Rosneft
Rosneft has formally requested widescale tax breaks to develop onshore oil reserves with Neftegazholding to ship more oil by the Northern Sea Route (NSR). Rosneft CEO Igor Sechin is hoping to ship 100mn tons of oil via the NSR annually by 2030, led by the development of a cluster of oilfields holding an estimated 1.9bn barrels of boe. Sources cited claim that two major variants are being discussed in the government: reducing the Mineral Extraction Tax (MET) 85%, or else phasing out both the MET and taxes on profits for the relevant oil fields. Russia's long-term OPEC+ cooperation still leaves space for needed investments into new production, and the Arctic will be necessary to sustain production levels in the longer-term. Moscow has hindered economic growth by raising taxes on the general population, and appears to be ready to offer up more breaks for the oil sector.
Russia's largest oil company Rosneft acquired a chain of 140 petrol stations in St Petersburg from Petersburg Fuel Company (PTK) of Andrei and Olgs Golubevs, Kommersant daily reported on July 31. Stronger presence in the retail segment and influence on sensitive issue of fuel prices could give Rosneft additional leverage in debates over state support with the government. The deal will boost Rosneft's retail portfolio by almost 5% to 3,100 stations, while giving it 27% of the market in Russia's second largest city and making the company the largest retail player in the Northwestern region. The sources of Kommersant daily previously estimated the value of the deal at RUB40bn ($0.6bn) and expected Rosneft to keep on expanding in the retail segment through acquisitions.
● Novatek
Novatek reported 2Q19 IFRS results. EBITDA reached $1.1bn on $3.4bn of net revenues. Net income also came in at about $1.1bn. EBITDA was up 8% q/q and down 3% y/y in 2Q, in line with our estimate and slightly ahead of the consensus. The improvement q/q stemmed mainly from a stronger margin for the liquids segment, which offset the negative pricing and volume dynamics for the gas segment. We estimate that LNG resale volumes from Yamal LNG contributed around $100mn to EBITDA in 2Q19. The EBITDA contribution from JVs declined by 8% q/q to $727mn, which came as a major positive surprise to us and suggests that Yamal LNG has already become much less exposed to the currently weak gas price environment thanks to the introduction of oil- linked contracts as well as export duty-exempt condensate sales. Net revenues, at $3.4bn, were down 4% q/q due to a drop in both LNG trading revenues and domestic sales volumes. Net income adjusted for revaluation and FX gains/losses was broadly in line with our estimates. A major positive takeaway from the results, in our view, was that FCF was around $1bn, in line with our estimate, helped by a R38.5bn ($0.6bn) dividend from Arcticgas (which went to operating cash flow) and a EUR0.2bn loan repayment from Yamal LNG (investing cash flow), both of, which had already been announced by the company. Though capex was down 33% q/q, it was still around 30% higher y/y mainly due to the development of the Arctic LNG-2 project.
Russia's second-largest natural gas producer and global liquefied natural gas (LNG) runner-up Novatek sold a 10% in its second LNG project Arctic LNG-2 to a consortium of Japanese Mitsui and Jogmec, with total Japanese investment of $3bn. The deal follows the first shipment of LNG to
97 RUSSIA Country Report August 2019 www.intellinews.com