Page 100 - RusRPTSept19

9.2 Major corporate news 9.2.1 Oil & gas corporate news
● Gazprom
Gazprom has produced 312bcm of gas since January 2019, up 1.7% y/y, which is a record high since 2011, Kommersant reports. Other Russian companies produced 431.9bcm of gas in January-July (+3% y/y). The growth was mainly driven by Novatek, which produced 40.9bcm during that period (+58% y/y) thanks to the ramp up at Yamal LNG, and Gazprom Neft, with gas production reaching 11.9bcm (+23% y/y), while Rosneft and Lukoil decreased gas output 3.9% y/y and 3.3% y/y, respectively.
Despite the significant increase in Gazprom’s gas production, its exports to Europe continue to decline: they were down 4.8% y/y to 111.5bcm in January-July. We therefore keep our forecast for the company’s supply to Europe at 191bcm (-5% y/y) in 2019F on the back of the relatively weak demand trends and jump in LNG supplies to Europe in 1H19, which almost doubled during the first half of the year. These, in turn, pushed gas prices down, with TTF at just 110/kcm (-61% y/y).
Separately, domestic gas demand was down 1.4% y/y in January-July.
Gazprom’s rising production can likely be explained by the active filling up of underground gas storage facilities, we think. This might not lead to a positive effect on the company’s financial performance unless gas demand or prices strengthen. Nevertheless, we believe that at this point investors might not be focusing solely on Gazprom’s financials but rather giving more attention to developments in the company’s corporate governance. Therefore, we deem the news as not market-moving.
Russia state-owned Gazprom Neft’s revenue in the first six months of 2019 totalled RUB1.215 trillion ($18.6bn), an increase of 6.8% year-on- year, the company said in a press release on August 8. The company had higher production growth at major projects (the Novoportovskoye and Vostochno-Messoyakhskoye fields), a more favourable pricing environment, and effective management initiatives delivering adjusted EBITDA growth of 10.8% year-on-year, at RUB408.1bn. Net profit attributable to Gazprom Neft PJSC shareholders totalled RUB215bn, a 29.2% increase year-on-year. Higher operating cash flow resulted in a positive free cash flow of RUB125.2bn in 1H19. Hydrocarbon production, including Gazprom Neft’s share in joint ventures, rose to 47.4mn tonnes of oil equivalent (mtoe) in 1H19, a 5.6% increase year-on-year, as a result of higher production levels at the Novoportovskoye and Vostochno-Messoyakhskoye fields, as well as in the Orenburg region, together with a greater ownership interest in Arсtiсgas.
● Novatek
The biggest independent gas producer in Russia, Novatek, is interested in supplying liquefied natural gas (LNG) from its Arctic LNG-2 project to Indian companies, Russian Deputy Energy Minister Anton Inyutsyn said on Monday, Rambler reported. “Novatek is interested in attracting Indian partners to the Arctic LNG 2 project and also in signing contracts for delivering LNG from the Arctic LNG 2 plant,” Inyutsyn said at a Russian-Indian business meeting, as quoted by the Russian Energy Ministry. Novatek plans to start
100 RUSSIA Country Report September 2019 www.intellinews.com