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DY. This was broadly in line with our expectation (see our Gazprom Neft – 4Q19F IFRS preview; healthy DY and capex jump of 20 February).
● Rosneft
Russia’s largest crude oil producer Rosneft reported $35bn in revenues in 4Q19 under IFRS, with sales up by 6% in the reporting quarter, with higher trading activity helping to offset 20% quarter-on-quarter lower fuel oil prices on average. As a result, the company contained its Ebitda decline at 12% q/q at $7.7bn, exceeding consensus expectations by 4%. Rosneft’s net profit was 29% q/q lower at $2.5bn, but in line with expectations. The company’s free cash flow adjusted for prepayments offsetting in 4Q19 remained flat q/q at $4.25bn, thanks to the positive effect of working capital release, and implied cash flow yield exceeded 20%, BCS Global Markets estimated on February 19.
The capital expenditure for Vostok Oil, the new Arctic project of Russia’s largest oil company Rosneft, may top RUB10tn ($158bn), the influential head of the company, Igor Sechin, told President Vladimir Putin, as cited by Interfax. As reported by bne IntelliNews, Vostok Oil is a joint venture (JV) set up to explore and exploit the oil resources of the Arctic, and the Kremlin has started to throw significant resources at the company as Russia’s existing oilfields reach peak production. Vostok Oil will be developed on the Taymyr Peninsula, based on two fields, Payakhskoe and West-Irkinskoe, while the massive development will include 15 new industry towns, two airports, a seaport, circa 800km of new pipelines, 3,500km of new electricity lines and 2,000 MW of electric power capacity, BCS Global Markets noted on February 12.
● Novatek
Russia’s second-largest natural gas company and global liquefied natural gas (LNG) runner-up Novatek reported 4Q19 Ebitda growth of 12% quarter on quarter under IFRS, beating consensus expectations despite a challenging market environment. In the reporting quarter, growth in gas sales and a higher LNG price q/q, along with a higher share of LNG sold under the long-term oil-linked contracts, translated into 19% hike in revenue q/q to $3.5bn, beating consensus expectations by 5%, BCS Global Markets commented on February 19. Novatek’s net profit dropped by 88% q/q to $0.7bn in the 4Q19, due to the abnormally high bottom line of $5.9bn in the previous quarter, when the company cashed in on selling stakes in the upcoming Arctic LNG-2 project to Chinese and Japanese companies. The bottom line in 4Q19 was also negatively affected by a $0.7bn currency loss.
9.2.2 Automotive corporate news
Russian heavy vehicle producer Kamaz and car assembler Sollers are considering setting up an alliance, Vedomosti daily reported on February 15 citing sources close to Kamaz. As reported by bne IntelliNews, in 2016 and 2017 Kamaz made a spectacular turnaround and boosted its market share on the domestic truck market. Most recently the company improved its high-tech appeal and reportedly prepares to test driverless trucks. Sollers is assembling a number of models in joint ventures with foreign and domestic car majors. Its investment case was revised in autumn 2019 on the back of strong performance of flagship LCV models such as Ford Transit and UAZ.
95 RUSSIA Country Report March 2020 www.intellinews.com
