Page 7 - FSUOGM Week 34 2019
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FSUOGM PERFORMANCE FSUOGM
Rosneft boosts profit by 51%, cuts debt in 2Q19 despite lower output
RUSSIA
Rosneft bene ted from higher oil prices.
RUSSIA’S largest oil producer, state-controlled Rosneft posted 51% quarter-on-quarter net income growth to $3bn in 2Q19 under IFRS, beating the consensus expectations by 14%.
e company’s revenues were up 5% q/q to $33bn due to the higher Brent price, as growth in the crude sales volume, despite crude contam- ination in Druzhba pipeline system, was o set by a drop in products sales, BCS Global Markets commented on August 21, seeing the results as positive.
As reported by bne IntelliNews, Rosne ’s out- put has been impaired in 2Q19, and the company has been pressing the government and Kremlin hard for compensation for the Druzhba pipeline troubles, Opec+ output cuts, and for state sup- port for Arctic development.
Rosneft’s Ebitda in the reported quarter matched the expectations at $8bn, but was down 5% q/q due to the 20% higher export duty and 9% MET (mineral extraction tax) spike. Free cash ow took a 30% q/q hit in 2Q19, but
remained positive at $2.1bn and in line with expectations of annualised cash ow yield (CFY) of above 10%.
“Although Ebitda matched conservative expectations, bottom line surprised positively and corresponds to 3.7% interim DY [dividend yield],” BCS GM estimated, maintaining a Buy recommendation for Rosne ’s shares at a target price of $9.5 per depository receipt (GDR).
e company’s board recommended an 1H19 dividend per share (DPS) based on adjusted 50% IFRS payout at RUB15.34/share (3.7% DY).
In the meantime the company continued to carry out its 2018 investment-makeover pledge of cutting debt, limiting the investment pro- gramme, and shedding non-pro le assets.
In 1H19 overall Rosne cut total debt by 14% to RUB3.8 trillion and pre-payments for supplies by 13% to RUB1.2 trillion, overall cutting the debt by RUB800bn. In 2018 Rosne also said it would carry out a $2bn share-buyback, yet to be announced.
KMG profits soar 73% in H1
KAZAKHSTAN
Proftis were driven by higher gas sales to China.
KAZAKHSTAN’S state oil and gas producer KazMunayGas (KMG) boosted its profits by 73% year on year in the rst half of 2019, on the back of increased gas sales to China and the devaluation of the Kazakh tenge.
Net income came to KZT622bn ($1.64bn) in the six months ending June 30, up from KZT359.7bn in the rst half of 2018, the com- pany said in a statement. Ebitda rose by 20.5% to KZT1.095tn, with the spike supported by a 1.4% growth in revenues to KZT3.4tn.
e performance li was largely the result of a 46.7% growth in KMG’s gas sales to China to KZT340bn. Kazakhstan was able to carve out a share in China’s gas market in 2017, a er completing a cross-country pipeline enabling it to transport gas from elds in the west to export infrastructure in the south-east. From an initial 5bn cubic metres per year, Kazakh- stan and China signed a five-year deal in October 2018 to double shipments to 10 bcm per year.
KMG also cited a drop in the tenge’s value as a key factor behind its higher earnings. e Kazakh currency dipped to record lows against
the US dollar last summer – in part a knock-on e ect from the devaluation of the Russian ruble as a result of US sanctions.
These factors more than offset a 0.5% y/y drop in the company’s first-half oil and con- densate production to 484,000 barrels per day (bpd). e slump was caused by maintenance at the Kashagan oil project in the Caspian Sea, and higher levels of well watercut at the onshore Karachaganak development. Gas output was up 0.9% y/y at 4.16 bcm.
In addition to its upstream operations, KMG also controls Kazakhstan’s oil and gas pipeline infrastructure and its three main oil re neries, as well as other downstream assets in Romania. e company completed a sweeping modernisa- tion programme at its Kazakh plants in late 2018, in order to alleviate domestic fuel shortages and produce a surplus for export. Production of die- sel rose by 6% y/y in the rst half to 1.985mn tonnes, while output of jet fuel surged 224.6% to 231,000 tonnes. Gasoline production fell 0.8% to 1.53mn tonnes, however, casting doubt on Kazakhstan’s plans to launch large-scale gasoline exports this year.
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