Page 120 - RusRPTDec20

This was followed by a proposal for the company to issue perpetual Eurobonds to help finance the project. In terms of Gazprom’s CapEx, we think the company will likely be required to cover perhaps half to 2/3 of the total, or $1.7-$2bn/yr, a significant portion of an annual CapEx budget in the range of $20-$30bn, but something already effectively accounted for in our approach to CapEx forecasts. News flow on Russia’s regional gasification program is modestly negative. CapEx for this project will not be allowed to affect the 50% dividend payout target, but returns on invested capital are likely to be poor, though already captured in our model.
In 4Q20, capex should be flat or slightly lower than in 3Q20.​ ​Gazprom Neft​ continues to invest in major projects, e.g. Zapadno-Zimny, as well as oil fringes, which continue to generate good revenue, according to management. The company still aims to attract foreign partners for the development of some fields. Even after the cancellation of the JV with Shell, SIBN thinks foreign companies are becoming interested again in setting up JVs. In the upstream, 18 projects in their early stages have been put on “smart-pause.” The company has saved RUB 9bn vs. its original plan for geological exploration, as well as has cut drilling by more than 30% and side-tracking by more than 55%. The company has not finalized its capex plan for 2021, but it did say that it could be more or less flat YoY.
● Rosneft
Rosneft​ has reported its 3Q20 IFRS numbers, with the headline EBITDA coming just slightly below us. Overall, EBITDA sizably increased 136% QoQ, mainly on the back of the recovery of oil and oil product prices. Still, the company’s negative earnings, coupled with the net loss for 6mo20, leave little room for dividends for 2020 unless the official dividend policy changes. Given this is what was expected by us and the consensus, the market did not particularly react to the numbers overall.
The company also held a conference call. The key takeaways from it are as follows:
· Rosneft is in full compliance with the OPEC+ limitations.
· Oil tax changes will affect the following amounts of oil produced by
the company (as of 2019).
· 57mnt by the cancelation of depletion relief
· 27mnt by EPT amendments (part of the Prirazlomnoye field).
· HVO breaks cancellation will affect production from Russkoye,
EastMessoyakhskoye and Sredenbotuobinskoye fields.
· Rosneft’s BoD will consider the buyback programme prolongation
until the end of 2021. USD 370mn has been spent to acquire
80mn of shares and GDRs by 6 November 2020.
· Vostok Oil is under the stage of approval within the company, so
120 ​RUSSIA Country Report​ December 2020 www.intellinews.com