Page 9 - FSUOGM Week 45 2019

FSUOGM PERFORMANCE FSUOGM
Rosneft delivers strong bottom line in 3Q19
RUSSIA
Net profit was up 25% in the first nine months of the year.
RUSSIA’S Rosneft oil major delivered strong results in 3Q19, with revenue growth of 1% quar- ter-on-quarter to $34bn and Ebitda growth of 6% q/q to $8.6bn beating the consensus expectations by 1% and 5% respectively.
In the reporting quarter the resolution of Druzhba contaminated oil related issues with Transneft pipeline operator helped to offset 10% q/q lower Brent price on average.
On the earnings level, the 10% drop q/q in RUB-based oil price was mitigated by higher reverse excise received by refineries and higher products sales, which translated into better downstream results, BCS Global Markets com- mented on November 6.
Rosneft’s bottom line in 3Q19 beat exceeded the expectations by 13%, gaining 16% q/q to $3.5bn on strong Ebitda performance, a $170mn currency gain, and a drop in non-operating expenses of 90% q/q.
In 9M19 overall Rosneft increased net profit by 25% to RUB550bn with the capital expendi- tures down by 6.6% year-on-year to RUB634bn
in the period, attributed mostly to extraction costs optimization.
Russia’s largest crude producer generated free cash flow of $4.3bn with a cash flow yield that exceeded 20% in the reporting quarter. “Since 2H18 dividends were paid in 3Q19, net debt increased 1% q/q despite strong FCF and stood at circa $43bn at the end of 3Q19,” BCS GM commented.
BCS analysts maintained the Buy recommen- dation on Rosneft with a target price of $9.5 per global depository receipt and suggested to focus on the plans of future deleveraging, impact on dividend per share, the new tax breaks, poten- tial international M&A activity, and buyback guidance.
During the conference call with the inves- tors the company reiterated keeping its capital expenditures in 2020 at the level of 2019 of about RUB1 trillion, while seeking to cut the leverage of net debt to Ebitda of 1.4x, even if it is seen as comfortable. Rosneft also sees higher down- stream activity in 2020 as many repair works in refining facilities will be completed. ™
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