Page 92 - bne IntelliNews Russia Country report May 2017

as far as we can judge from the reported balance sheet.
Russian arbitration court has rejected the Rosneft 106B RUB claim against Sistema over Bashneft over money lost during Rosneft’s take over of the oil company on jurisdiction grounds . Rosneft's response to the news is that it filed the case both in Moscow and Ufa and that they don't care where the case is heard. So they are pressing ahead Sistema's response is that they have not seen the case filed to Bashkortostan. We will assume that they will see it soon Sistema stock is +9% but has softened. This is positive news but could be marginal. Nothing decisive. During the previous attack on Sistema (which was via the Arbitration Court) Sistema had the right to appeal. However, decided not to exercise this right.
Russia’s state-controlled oil major Rosneft is facing difficulties finalising the $12.9bn acquisition of Indian Essar Oil, its largest foreign deal to date, according to a report by Reuters on May 11 citing unnamed sources close to negotiations. Reportedly banking and industrial sources claim that six Indian state banks and financial institutions accounting for about $500mn of Essar’s debt are blocking the deal that Rosneft initially hoped to close by the end
of 2016 .
Rosneft 1Q17 IFRS were weak, as expected. On Friday 5 May, we published Rosneft – 1Q17 IFRS; weak, as we expected. Excerpts from the front page are given below. Rosneft has reported its 1Q17 IFRS results, which were weak, as we expected, on revenues and EBITDA. However, the numbers were significantly below the consensus expectations. The bottom line was affected negatively by non-operating items. We think that the market might react negatively. Revenues broadly in line. Rosneft's oil output decreased, as we expected, due to the OPEC/non-OPEC agreement to cut oil production. This, coupled with lower refining throughput both in Russia and abroad, affected the top line negatively. As a result, despite the 9% Q/q growth in the price of oil, gross revenues increased only 2% Q/q to $24bn, or broadly in line with our expectations and 3% below consensus. On the costs side, the company showed better control over opex than we expected. In particular, other operating costs dropped 76% Q/q in 1Q17, while we had expected them to be relatively flat Q/q. The other key cost items, including transportation expenses and non-income taxes, were broadly in line with our forecast. Therefore, EBITDA was 3% above our estimates, but 12% below the more aggressive consensus estimate, at $4.8bn.Below EBITDA, interest expenses increased 22% Q/q in $terms (13% Q/q in RUB terms) in 1Q17, while total debt (not including prepayments) was up only 1% Q/q in $terms (down 6% Q/q in RUB terms) over the period. The FX loss was reported at $765mn, while we had expected $514mn. As a result, net income reached $221mn in 1Q17, or 14% and 27% below our expectations and the consensus forecast, respectively. The FCF was negative at $492nm, while we had forecasted it at a marginal positive level in 1Q17.
Russian state-controlled oil major Rosneft could despite difficulties finalise a $12.9bn acquisition of India’s Essar Oil in June, the chairman of the State Bank of India Arundhati Bhattacharya was quoted as saying by Reuters. “There is a very real opportunity that the deal will be closed soon,” Bhattacharya said at the sidelines of St Petersburg International Economic Forum (Spief). Reuters previously reported that Rosneft is facing difficulties closing its largest foreign acquisition yet, with six Indian state banks and
92 RUSSIA Country Report May 2017 www.intellinews.com