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under IFRS as dividends under the current favourable macro environment.
Russian oil major Rosneft says its oil production has already returned to its pre-OPEC+ deal levels, a high it struck in October 2016, or a 120kb/d increase on the capped deal limits, and it can lift output another 200kb/d in the third quarter of this year, the company said in a press release . “ Average daily liquids production reached 4.6 mmbpd in Q2 2018, demonstrating 0.8% growth both Q/q and y/y. Taking into account the arrangements on partial recovery of oil and condensate production under the OPEC+ Agreement, the Company was able to rapidly increase production up to the level prior to the limitations commencement (October 2016) already in the beginning of July, which indicates the correct strategic approach to production management. The Company has the technological capacity to increase the liquids production in Q3 by ~200 kbpd, which was already utilized in the amount of ~120 kbpd in June-July immediately after the 174-th OPEC countries conference and 4-th OPEC+ countries’ Ministers meeting decision announcement,” Rosneft said. Although the Opec deal is still in effect Russia’s oil production is rising again and is expected to high new all time highs this year and next . Russia's total crude oil output in July 2018 stood at 11.22mn barrels daily , up by 1.4% month-on-month and 2.4% year-on-year, according to the August 2 Ministry of Energy report. Relative to the November 2016 levels the output has been cut by 0.032mnbd or only a third versus the 0.1mnbd cut implied by the 23 June 2018 relaxation of the previous Opec+ production cut agreement , Renaissance Capital estimated on August 2. This confirms previous reports that as of mid-July Russia's crude oil output had already reached 11.2mnbd, almost at the record high levels of October 2016, as well as reports on an increase of oil output in June .
The net profit of Russia's Rosneft jumped to $3.9bn in the second quarter of 2018 from $1.5bn in the first quarter, Vedomosti daily said on July 31 citing the financial reports of British Petroleum that controlled 19.75% stake in Russia's largest crude producer. "BP results tend to overestimate Rosneft earnings," Renaissance Capital commented on July 31, nevertheless forecasting Rosneft's income to come in at RUB240bn or 21% above the analysts' estimate. RenCap expects "record-strong results, driven by a favourable external environment, accelerating production and improved strategic focus on domestic operations," while maintaining the Buy rating on the name. Rosneft is set to publish its financials on August 7. The company posted solid earnings in the first quarter and started to deliver on its recent pledge to investors to cut massive capex programme and reduce debt , seeking to support capitalisation seen as undervalued by Rosneft's management.
Russia’s state-owned oil company Gazprom Neft put in strong 2Q18 IFRS results. Gazprom Neft has published strong 2Q18 IFRS results, as the consensus expected on the back of high oil prices, as well as increased crude production and refining volumes, VTB Capital (VTBC) said in a note. The numbers were well received by the market as the stock outperformed peers by some 1.8% on the day of the report release. VTBC 12-month Target Price of $5.20 is unchanged and implies an ETR of 10%: Hold reiterated. The 2.0% q/q rise in oil production came slightly below expectations. However, it was offset by higher than expected oil purchases (5.6mnt in 2Q18). As a result, oil sales volumes were in line with VTBC estimates. There were no major discrepancies between oil products volumes and forecasts, with sales growing 6% q/q. As a result, Gazprom Neft’s top line grew 9% q/q to $9.9bn, in line with VTBC forecast and the consensus. On the costs side, Gazprom Neft showed better than expected distribution costs of $676mn. They were down 14% q/q, despite the 4% q/q growth of oil and oil products sales in 2Q18, implying an 18% q/q slide in distribution costs per barrel (and 8% compared with the average cost for 2017). “The company did not specify the reason for this decrease in the financial statements, but we think this might be mentioned during the conference call. All other costs were generally in line with our forecasts. Therefore, EBITDA increased 26% q/q to $2,711mn, or 3% above consensus
103 RUSSIA Country Report September 2018 www.intellinews.com