Page 104 - RUSRptSept18

and our estimates. Below the operating level, the company reported a $48mn other loss (we do not fully understand the reason for this). Other non-operating costs were close to our estimates. As a result, Gazprom Neft's net income increased 28% q/q to $1,567mn, or in line with our forecast and 1% above consensus. The positive free cash flow of $0.8bn (before changes in working capital) exceeded our forecast of $0.6bn,” VTBC said. Gazprom Neft resumed the practice of paying interim dividends last year -- for the first time since 2015 -- when it paid them for 9mo17 at RUB 10/share (or 25% of IFRS net income). “We view Gazprom Neft’s statement that it intends to raise the payout ratio as positive, although we do not expect to see a sizable hike in the payout, given that management has previously stated that it would rather see sustainable gradual growth in dividend payments. We estimate that Gazprom Neft might pay RUB16.90/share in dividends for 9mo18 if it increases the payout ratio to 30% (from 28.1% in 2017), which would imply an interim dividend yield of 4.9%. In the blue sky scenario of a 50% payout, interim DPS might amount to RUB 28.20 and deliver a healthy interim DY of 8.2%, on our numbers,” VTBC said. Regarding the capex guidance for 2018 remaining flat y/y at RUB 360bn ($5.4bn), it is slightly lower than our forecast of RUB 375bn ($5.6bn). Therefore, we see some upside risks to our forecasts. As for production growth, the company has previously stated that it could raise output 37-40kb/d if the OPEC caps were lifted. Gazprom Neft showed even higher output growth in July (+64kb/d MoM), according to CDU TEK. If this growth holds, that might well support the company's financial performance in the second half of the year.
Gazprom increased exports to Europe from January to July of 117.1bn cubic meters, which is 5.8% more than a year ago. In particular, growth in shipments to Germany was 12.3%, in Austria - 48.3%, in the Netherlands - 53.8%, in France - 11.8%, and in Croatia - 40.1%%, to Denmark - by 11.9%, Poland - by 6.6%. In July, exports increased by 5% to 15.9bn cubic meters -- a record for this month, writes "Interfax": the previous record was delivered a year ago (15.13bn cubic meters). At the same time, the main gas pipelines - Yamal-Europe and Nord Stream - stopped for repairs. For seven months, Gazprom's production increased by 8.5% to 288.9bn cubic meters. Including in July - by 7.4% to 36bn cubic meters. "This is the maximum production level for this month for the last seven years (from 2012)," the press release said.
Russia's largest oil company Rosneft could settle its most recent legal offence against foreign partners of the Sakhalin-1 extraction project with a $0.2bn-0.3bn out-of-court payment , Kommersant a nd Vedomosti d ailies reported citing the information of Indian ONGC. Rosneft claims that its partners in Sakhalin have transfer of oil from the North Chayvo field (owned by Rosneft) to the Chayvo field (Sakhalin-1 project) since 2005 (when crude production at Sakhalin-1 started), although Rosneft did not own the licence for North Chayvo at that time. The company claims RUB89.1bn ($1.4bn) from its foreign partners in the Sakhalin-1 liquefied natural gas project, namely Exxon Neftegaz Limited controlled by the US major Exxon, a subsidiary of Japanese SODECO, and Indian ONGC Videsh (control 30%, 20%, and 20% in Sakhalin-1, respectively). "The settlement amount of $200-300mn... might add 0.7-1.0% to Rosneft’s 2018F EBITDA," VTB Capital calculated on August 6, adding that should the case to be settled in 2018 "the effect on the company’s dividend payments would be rather negligible". Aton Equity also sees the claim as not material for Rosneft, even if settled out of court and sees the news as neutral for company's shares. Notably, previously Rosneft already claimed losses to its projects retroactively to subsequent owners, suing Russian investment conglomerate AFK Sistema for losses allegedly inflicted to Bashneft oil company before it was forcefully re-nationalised, extracted from Sistema, and re-sold to Rosneft. Rosneft got a RUB100bn ($1.76bn) settlement from Sistema .
Russia's second-largest gas company Novatek has asked ship-owner Teekay to deliver a second Arc7 LNG tanker earlier than previously
104 RUSSIA Country Report September 2018 www.intellinews.com