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Net income beat our expectation but was 1% behind consensus at RUB65.2bn vs. a net loss of RUB30.7bn in 1Q20. Novatek booked a RUB4.5bn FX loss, which is close to the FX loss we expected. The share of profits from associates was RUB14.8bn vs. a RUB145bn loss in 1Q20 and our 1Q21 estimate of RUB17.7bn.
Other notable items. Arcticgas paid RUB104bn in dividends, out of which RUB52bn was attributable to Novatek. Ternetegas transferred RUB160mn in cash to Novatek. Novatek provided RUB64.5bn in loans to JVs vs. RUB14.4bn in 1Q21.
The company’s net debt increased from RUB39.6bn at YE20 to RUB69.8bn at the end of 1Q21 as its cash/liquid assets decreased, while total debt was down from RUB222bn at YE20 to RUB176bn at the end of 1Q21. The decrease in liquid assets was in part due to a 24% decrease in cash and a 75% y/y decrease in short-term bank deposits.
Capex was flat y/y and down q/q to RUB41.4bn, which helped push FCF up from RUB17.9bn in 1Q20 to RUB31.8bn in 1Q21. Most capex spending in Q1 is related to developing LNG projects, according to the company, along with the launch of fields at the North Russkiy cluster and the development of crude deposits at the East Tarkosalinskoye and Yarudeyskoye fields.
Prior to the results release, Novatek announced that it and TOTAL had signed a Heads of Agreement to acquire 10% of Arctic Transshipment LLC, which will operate two LNG transshipment complexes being built in Kamchatka and Murmansk. Each complex will have a 360mcm LNG storage unit and two ship-to-ship transshipment points, according to the press release.
Novatek already announced that Arctic LNG 2 had signed 20-year LNG sales and purchase agreements (SPA) with all of the project’s participants, according to a press release. The first train of Arctic LNG 2 should launch in 2023. The SPAs are based on FOB Murmansk and FOB Kamchatka, with pricing formulas based on oil and gas benchmarks. Volumes are proportional to ownership stakes.
The Novatek AGM on April 23 approved project financing for Arctic LNG-2, the company has disclosed. For this financing, Novatek has pledged its 60% stake in the project. Novatek CEO Leonid Mikhelson said the project financing will amount to $11bn, with around a third coming from Chinese, Japanese/European and Russian banks (Sberbank, Gazprombank, VEB and Otkritie, according to the disclosure), as well as export credit agencies. The company has not disclosed the terms of the financing. While the approval of
158 RUSSIA Country Report May 2021 www.intellinews.com