Page 13 - FSUOGM Week 48

FSUOGM PERFORMANCE FSUOGM

Tatneft stays in black in Q3,

but scraps interim dividend

RUSSIA RUSSIAN mid-sized oil producer Tatneft in a research note. However, neither VTBC nor
remained in the black in the third quarter, deliv- BCS GM expect a shift in longer-term dividend
Tatneft's board failed to ering an expected quarter-on-quarter rise in policy.
take a decision on a Q3 earnings. But its financial numbers were much Tatneft’s board has also opted against switch-
dividend. weaker than a year earlier, and it seems to have ing fields affected by a recent reform of Russian
opted against a Q3 dividend. oil taxation to a new excess profit tax system. The
The Tatarstan-based firm delivered a net company has traditionally received tax breaks at
income of $0.49bn in Q3 2020, up 105% q/q but its highly viscous and highly depleted fields in
down 47% year on year. This surpassed the fore- Tatarstan, but it was stripped of this support
cast of BCS Global Markets (BCS GM) by 35% under legislation recently passed by Parliament.
and beat the consensus among analysts by 19%. The government has encouraged companies
EBITDA came in at $0.79bn, up 67% q/q but that have lost breaks to transfer affected fields to
down 39% y/y. It was also 18% above BCM GM’s the EPT system, launched last year to support
guidance. The improvement from Q2 was no investment in more challenging projects.
surprise, given the steep decline in oil prices in Shares in Tatneft fell 4% after the results from
April, when coronavirus (COVID-19) restric- the board’s meeting were announced.
tions were in full force. “Taxes and dividends – it doesn’t get much
Free cash flow (FCF) reached $0.36bn, up more fundamental for Russian oil companies,
from negative $0.11bn in Q2 2020 but 39% and it looks as if Tatneft’s board of directors
weaker than the average for the previous six delivered negative news on both fronts,” BCS
quarters. Its capital expenditure came to $0.36bn, GM said. “However, we’d caution against over-
up 5% q/q but 2% below the previous six quar- reaction in either case.”
ters’ average. A number of Russian oil companies are still
Revenues amounted to $2.55bn, up 17% q/q negotiating the implementation of the new tax
but down 38% y/y. Its oil production rebounded laws regarding their affected projects, including
to 487,000 barrels per day in the three-month Tatneft.
period, from 468,000 bpd in Q2 2020, thanks to “A move such as this – signalling a potential
the easing of OPEC+ cuts. halt in investment and, logically, a slide in pro-
duction – may well be a part of that negotiation
No dividend process,” BCS GM said.
Tatneft’s board also took analysts by surprise on Tatneft, which produces almost all its oil and
November 27 by failing to take a decision on a gas in Tatarstan, is the region’s biggest employer
dividend for Q3 2020, implying that one is not and therefore plays a key role in the local
likely to be paid. economy.
The company was notably the first Russian “Its investment plans have [a] bearing on the
oil company to cancel its dividend for Q4 2019, local social structure, something that must be
citing the impact of the coronavirus pandemic. taken into account in Moscow,” BCS GM con-
But it had since indicated it would continue pay- tinued. “Therefore, we would expect further
ments up to the end of 2020. adaptation of the tax code to be implemented
The decision not to pay dividends was likely as necessary to keep Tatneft’s high-viscosity
driven by liquidity management and uncertainty oil and highly depleted oil fields adequately
about future taxation, VTB Capital (VTBC) said profitable.”™

Week 48 02•December•2020 www. NEWSBASE .com P13