Page 9 - FSUOGM Week 48 2019

FSUOGM PERFORMANCE FSUOGM
Tatneft bounces back from Druzhba problems in 3Q19
RUSSIA
Tatneft was one of the producers hardest hit by the dirty oil crisis.
RUSSIAN regional oil major Tatneft increased IFRS revenues in 3Q19 by 9% quarter-on-quar- ter to $3.74bn, Ebitda by 9% q/q to $1.3bn, and net income by 8% q/q to $905mn.
The company exceeded the bottom line expectations by 4% and bounced back from the 2Q19 when its performance was compromised by oil quality problems in Druzhba pipeline and Ust-Luga port.
The revenues in 3Q19 increased despite 10% lower q/q oil price thanks to 9% export duty q/q decrease and 24%/7% crude/products sales vol- ume spike q/q, BCS Global Markets commented on November 29.
BCS GM notes that the same factors helped Tatneft’s Ebitda growth of 9% q/q beat that of Rosneft (6% q/q), Lukoil (-1% q/q) and Gaz- prom Neft (-1% q/q) in 3Q19.
“The major positive surprise was on FCF level, which in 3Q19 stood at circa $1.3bn well ahead of our forecast and 2Q 19 metrics as work- ing capital release in 3Q 19 (circa $130mn) was
just partly undercut by 9% higher capex q/q,” BCS GM noted, estimating the cash flow yield (CFY) at 19%.
“Strong FCF provides positive read through for sustainability of high dividend yield (DY), which in 3Q19 stood at 3.2% for ordinary shares,” BCS analysts wrote, maintaining the $80 target price and Hold recommendation on Tatneft.
This month the board of Tatneft recom- mended paying RUB64.47/share in dividends for 9M19, including the RUB40.11/share already paid for 1H19. The CEO of the company Nail Maganov said that the payout for 2019 is expected to be at least as large as the RUB84.91 per share paid for 2018.
Sberbank CIB on November 14 estimated that Tatneft will pay all of its 2018 FCF ($2.3bn) in dividends in 2018-1Q19 (for an 8.3% yield), and that Tatneft already distributed more than the entire amount of its FCF expected for this year ($2.4bn) in payments in 3Q-4Q19 (a total of $2.6bn, for a 9.4% yield). ™
POLICY
Ukraine, Russia talk transit once again
UKRAINE
The countdown continues and there is still no deal.
UKRAINIAN and Russian ministers extended talks for a new natural gas supply contract though Ukraine at a bilateral meeting in Vienna on November 28, Ukraine’s energy ministry said in a press release that day.
Talks on a new deal will continue in both bilateral and trilateral formats, with the partici- pation of the EU side, the ministry stated. “Sign- ing of a long-term transit agreement according to EU legislation and based on economically justified conditions is a question of energy secu- rity not only for Ukraine, but also for Europe,” the ministry stated, adding that Ukraine has to secure the stability of natural gas transit for Euro- pean markets.
Besides several ministers, Gazprom CEO Alexey Miller, Naftogaz Executive Director Yuriy Vitrenko and Serhiy Makogon, the CEO of a new transit company Operator of Gas Transit System of Ukraine, participated in the bilateral talks, as reported by the ukranews.com news site.
Gazprom reported the next day that a bilat- eral discussion of the technical aspects of possi- ble gas transit through Ukraine since 2020 were held “at an expert level” on November 29, with the participation of Gazprom and Operator of GTS representatives.
Ukraine is not going to forgive Gazprom its
$2.6bn debt obligation under the Stockholm arbitration court rulings of 2017-2018, the ukranews.com news site said. But as a com- promise it is ready to discuss the revision of a $12bn legal claim against Gazprom (filed with the Stockholm court), as well as the waiving of a UAH172bn (about $7bn) penalty imposed against Gazprom by Ukraine’s antimonopoly committee.
The Ukrainian side is envisioning a new tran- sit contract being signed for ten years, with Rus- sia committing to transiting at least 60 bcm of natural gas annually in five years, with a possible decline in volume afterwards, the news site said, citing its sources.
“These developments look like a real break- through in the gas transit talks, given that it was the first Ukraine-Russia bilateral meeting on natural gas issues since at least 2014. This increases the probability that the two sides will be able to agree on a new gas transit arrange- ment, and possibly gas supply deal, by the end of 2019. Taking into account this positive development, we are maintaining as our base case a scenario that Ukraine and Russia will reach a final deal on gas some time in 2020,” Alexander Paraschiy of Concorde Capital said in a note.™
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