Page 104 - RusRPTDec19

3Q19, net debt increased 1% q/q despite strong FCF and stood at circa $43bn at the end of 3Q19,” BCS GM commented. BCS analysts maintained the Buy recommendation on Rosneft with a target price of $9.5 per global depository receipt and suggested to focus on the plans of future deleveraging, impact on dividend per share, the new tax breaks, potential international M&A activity, and buyback guidance. During the conference call with the investors the company reiterated keeping its capital expenditures in 2020 at the level of 2019 of about RUB1 trillion, while seeking to cut the leverage of net debt to Ebitda of 1.4x, even if it is seen as comfortable. Rosneft also sees higher downstream activity in 2020 as many repair works in refining facilities will be completed.
● Novatek
Novatek​ released 3Q19 IFRS. Revenue fell 12% q/q to c$2.9bn, ​broadly in line with BCS and consensus. Challenging macro conditions translated into an 18% q/q drop in EBITDA to c$881mn – 3% and 8% above consensus and BCSe, respectively. Net income came in at a record high c$5,950mn due to a 1-off monetary gain from the sale of 30% in Arctic LNG 2. Net debt fell c75% y/y; net debt/EBITDA ‘19e fell lower than 0.1. FCF stayed positive at c$220mn, with CFY at c1.4% amid zero changes in CapEx q/q. The company provided little positive expectations but its intention to revise dividend payment ratio in 2Q20.
● Lukoil
After showing mixed output numbers in 3Q19, Russia's second-largest oil producer independent oil major ​Lukoil​ reported revenue decline of 8% quarter-on-quarter to $30bn​. The 5% q/q decline in crude oil sales volumes, 10% lower oil price, was again supported by stronger downstream sales and seasonally higher refining margins. Lukoil's Ebitda remained flat at $5bn, despite the lower oil price, beating the consensus expectations by 10%. Net income gained 5% q/q to $2.9bn, supported by $72mn Fx gain lower income tax rate, also exceeding expectations by 16%. Most notably, Lukoil posted $3.2bn cash flow in 3Q20, making for an annualised cash flow yield (CFY) of 20%. For 9M19 overall, the cash flow jumped by 51% year-on-year to RUB517bn ($8bn), already exceeding all of 2018 CF of RUB555bn. The cash flow was supported by almost flat capex q/q, and lower upstream numbers were compensated by strong downstream performance. At the end of 2018 the company also ​offset the negative effects of the lower prices in the upstream with its downstream segment earnings​, and performed better in the downstream than its peers Rosneft and Gazprom Neft.
Lukoil​ held a conference call dedicated to 3Q/9M19 IFRS. Below are the key takeaways: ​FCF/production reached record highs at c$15/boe in 3Q19, $12/boe for 9M19 CFO said that implied DPS of Rb312 (based on FCF 9M19 less buyback) is already in line with consensus for FY19, while, including buyback, 9M19 DY is close to 11% 9% decrease in CapEx in 9M19 is related to the completion of gas projects in Uzbekistan and oil projects in the North Caspian – some seasonal growth of investments is expected in 4Q19 CapEx for 2019 is expected below Rb470bn, whereas for 2020+, CapEx is guided at Rb550bn – subject to the OPEC+ agreement. CapEx growth is mainly associated with investments in Russian upstream, drilling and fields with profit based taxation and potential international CapEx. Some downstream projects with short payback have also been considered Lukoil expects to see growth in
104​ RUSSIA Country Report​ December 2019 ​ ​www.intellinews.com