Page 122 - RusRPTDec20

· Cost savings achieved are running ahead of management’s plans
· 2020e CapEx guidance was slightly reduced relative to 2Q20 call
guidance to Rb460-Rb480bn and far lower from the original plan of cRb550bn. In USD terms, CapEx is likely to be c$6.5bn vs the original plan of $8.5bn. Tentative ‘21e CapEx guidance was put at Rb450bn
· When asked about a seemingly sub-optimal 0.2 net debt/EBITDA ratio and the possibility of raising debt to restart the buyback program, management agreed the balance sheet is too strong, but in this crisis year they are prioritizing stability over optimizing the balance sheet
· Regarding investment plans after the September tax changes, management confirmed that EBITDA from high-viscosity will be significantly reduced next year, but that dividends will be less affected as CapEx will be cut there.
● Other
Tatneft​ reported a massive q/q improvement in RAS financials in 3Q20​. The company's RAS EBITDA increased by 91% q/q to $658mn and RAS net income jumped to $396mn (versus $40mn in 2Q20). Given its relatively simple corporate structure, Tatneft's RAS financial performance is usually a good rough proxy for the IFRS results, which will be released only in a month. The disclosed RAS results for 3Q20 suggest that our IFRS forecasts ("3Q20 Earnings to Bounce Back Nicely from 2Q20 Trough" from October 22) are relatively conservative. More importantly, Tatneft stressed previously that interim dividend payments are limited to RAS net income. The company's board recommended a R9.9 per share dividend for 1H20 based on a 100% payout ratio on RAS net income for 1H20 (R23bn). We calculate that reported RAS net income at R29bn implies a R12.6 per share dividend for 3Q20 (3.1% quarterly yield), which could be announced later this year. This would be R2.6 per share higher than we expected (R10 per share) based on our financial forecasts.
Russian oil company​ ​Tatneft​ still plans to produce around 26mn tonnes of oil in 2021 and 26.25mn tonnes in 2021​, VTB Capital said in a statement on Friday following a meeting of Tatneft’s management with analysts and investors. “The company has confirmed its 2020 forecast of 26mn tonnes. Under the baseline forecast for 2021, production will rise by by 0.25mn tonnes next year taking into account OPEC+ parameters that are in force as of now,” the statement read. If the OPEC+ restrictions are lifted, Tatneft will be capable of resuming to produce as much as before the deal in up to two months, but if the restrictions remain, the company will not allocate capital expenditures to increase production, VTB Capital said. In 2019, Tatneft produced 29.468mn tonnes of oil, of, which super-viscous oil accounted for 2.735mn tonnes.
122 ​RUSSIA Country Report​ December 2020 www.intellinews.com