Page 14 - FSUOGMWeek 10 2020

FSUOGM
NEWS IN BRIEF
FSUOGM
RUSSIA
Russia’s Lukoil oil major posts strong cash flow in 4Q19, to deliver on dividends
Russia’s second-largest oil producer and independent oil major Lukoil reported a 1% quarter-on-quarter decline in revenues in 4Q19 to $30.4bn, in line with consensus expectations. The top line was supported by 4% higher q/q crude oil sales and undercut by 20% lower prices.
As reported by bne IntelliNews, the investment case of one of the most valuable Russian oil and gas blue chips in 2019 was further reinforced by the launch of the second $3bn buyback programme and the pledge to pay at least 100% of cash flow in dividends.
Lukoil’s Ebitda declined by 14% q/q
to ($4.4bn) as expected, similar to the momentum demonstrated by domestic peers Rosneft (-12% q/q) and Gazprom Neft (-16% q/q) in 4Q19, BCS Global Markets commented on March 10.
Net income in 4Q19 dropped 36%
q/q, missing expectations by 18%, due to $375mn one-off expenses related to asset impairments. At the same time, free cash flow (FCF) beat consensus expectations by 15%, amounting to $2.9bn in 4Q19.
“Although [the] bottom line came below estimates driven by negative one-offs, q/q decline in Ebitda matched forecast, while FCF (26% annualised cash flow yield) outpaced our expectations and points to about RUB300 dividend per share (DPS) for 2H19,” BCS GM wrote.
The company’s net debt of about $2bn turned into circa $200mn of net cash as of end of 2019 on the back of positive FCF, as dividends for 1H19 were paid in January while about $1.6bn in share buybacks took place in August.
BCS GM analysts suggest a focus on the dividend yield and FCF sensitivity
to low oil prices, buyback guidance and production outlook, international strategy and DPS guidance, while reiterating a Buy recommendation on Lukoil with target price of $130.
March 10 2020
Fitch downgrades Russia’s
RussNeft rating to CCC+
from B
International rating agency Fitch has downgraded the long-term issuer-default
rating of Russian oil company RussNeft to CCC+ from B, the agency said in a statement on March 6.
The rating downgrade reflected the deterioration of liquidity of RussNeft, Fitch said, adding that the agency also doubted the corporate management practices of the company.
March 10 2020
EASTERN EUROPE
Ukraine in talks with US on long-term gas supply
Ukraine is in negotiations with the U.S.
on long-term imports of large volumes
of natural gas, Energy and Environment Minister Alexei Orzhel told newswire Unian in an interview released on March 4.
“We have been recently considering the possibility of long-term gas imports from the U.S... I think it is the right and adequate thing to sign a 10- or 20-year contract of such kind,” Orzhel said.
“Yes, the portfolio is being formed. It is a geopolitical document and energy security for us. Its fulfillment is planned through infrastructure of Poland.”
Ukraine ceased gas purchases from Russia in November 2015. The supply and transit contracts between Russia and Ukraine expired at the end of 2019.
bne IntelliNews, March 2 2020
Belarus expects to benefit from oil price drop
The global oil price fall opens up new opportunities for Belarus at negotiations with Russia on terms of oil deliveries, the nation’s Prime Minister Sergei Rumas said on March 9.
“This is an additional opportunity
to agree [on the oil price] with Russia, considering that the current situation is way different from the situation that existed in either December or January,” news agency BELTA quoted him as saying.
Belarus faces a severe shortage of Russian oil for its two refineries – major money- spinners for the economy – as Moscow halted crude supplies to Belarus on January 1 after a contract expired, and the two countries are in negotiations over a new agreement.
Minsk said later in January that it had secured a temporary limited solution on shipments from companies of Russian oligarch Mikhail Gutseriev, without paying a premium. In past years Belarus bought
oil on terms similar to those for Russian independent refineries, which involved a small premium.
On January 24, Belarusian President Alexander Lukashenko pledged to purchase crude oil “in America, Saudi Arabia and the UAE” following Moscow’s refusal to deliver oil to the post-Soviet nation in 2020 on Minsk’s terms.
In February, Lukashenko pledged to siphon off Russia’s transit oil from the Russia-EU oil pipeline Druzhba, if Moscow failed to supply the “necessary volume” of oil in February. The pipeline splits into two routes in Belarus - a northern leg runs to Poland and Germany, and a southern leg to Ukraine, the Czech Republic, Hungary and Slovakia.
bne Intellinews, March 10 2020
CENTRAL ASIA & SOUTH CAUSASUS
Uzbek gas exports down 9.4% y/y in 2019
Uzbekistan exported 13.5bn cubic metres (cm) of natural gas in 2019, down by 9.4% y/y, Fergana news agency reported on March 3.
The decline is in line with Uzbekistan’s long-term goals of cutting gas exports and relying on natural gas for producing finished products, including fuels. Uzbekistan’s ongoing construction of a $3.7bn gas-to- liquids (GTL) plant, set to be launched in 2020, is one example of a project that will consume much of Uzbekistan’s own gas output. Uzbekistan’s natural gas production in 2019 stood at 59.5bn cm. Uzbek authorities are hoping to fully discontinue gas supplies abroad by 2025.
Among importers of Uzbek gas, Russia bought 6.8bn cm, accounting for over 45%
of Uzbekistan’s total gas exports, the report said. China’s imports of Uzbek gas made up 5.1bn cm, or 37.2% of total Uzbek gas exports. Moreover, China’s imports of Uzbek gas fell by 35% y/y in 2019.
Kazakhstan was the third largest importer of Uzbek gas at 2.2bn cm, followed by Tajikistan (140mn cm) and Kyrgyzstan (36.2mn cm).
Russia bought Uzbek gas at an average price of $145.76 per 1,000 cm in 2019, while China paid $182.25 per 1,000 cm. Kazakhstan purchased Uzbek gas for $198.2 per 1,000 cm.
Uzbek gas export revenues to the state budget amounted to $2.2bn.
The Central Asian nation’s proven natural gas reserves stand at 1.1tn cm with estimates of unproven reserves at 5tn cm.
bne IntelliNews, March 4 2020
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Week 10 11•March•2020