Page 7 - FSUOGMWeek352019

FSUOGM INVESTMENT FSUOGM
Tatneft snaps up chemical assets from Sibur
RUSSIA
The deal will enable Tatneft to vertically integrate its tyre producing business.
RUSSIAN regional oil major Tatne will acquire petrochemical assets in the city of Tolyatti from petrochemical major Sibur for an undisclosed amount, Kommersant daily reported on Sep- tember 2 .
For Tatne the deal will allow it to vertically integrate its tyre producing subsidiary Kama Tyres, while Sibur will continue to work with the assets on partnership terms.
As reported by bne IntelliNews, Tatneft previously expanded its re ning capacity. e company approved a 2030 strategy last year, including the construction of RUB70.6bn ($1bn) gas chemical complex by 2024, raising oil output to 38.4mn tonnes by 2030, and spend- ing RUB799bn in capex in the extraction and RUB194bn in re ning from 2019 to 2030. As a result, Tatne anticipated market capitalisation
to rise to $36bn by 2030.
For 2Q19 Tatne posted a decline in IFRS
financials, but BCS Global Markets argued that “negative momentum and weak P&L are associated with inventories reshu ing caused by crude contamination in Druzhba pipeline system and should revert in 3Q19, while 1H19 DPS [dividend per share] has already been announced.”
Sibur is the leader of the Russian petrochem- ical industry and one of the largest companies globally in this sector. It has more than 26,000 employees and the company’s unique vertically integrated business model allows it to create highly competitive products consumed in the chemical, fast moving consumer goods (FMCG), automotive, construction, energy and other industries in 80 countries worldwide.™
PERFORMANCE
Tatneft sees 60% drop in cash flow in 2Q19
RUSSIA
The Druzhba oil contamination crisis was a factor.
RUSSIA’S Tatarstan-based Tatneft reported 8% quarter-on-quarter decline in net pro t to $837mn in 2Q19 under IFRS, missing the expec- tations by 8%. e company posted cash ow 60% q/q drop in cash ow, although adjusted cash ow remained positive at $257mn.
BCS Global Markets on August 29 saw the results as neutral expecting a reversal in the third quarter, while a rming the Hold rating on Tat- ne wth target price of $85 per GDR.
“Negative momentum and weak P&L are associated with inventories reshu ing caused by crude contamination in Druzhba pipeline system and should revert in 3Q19, while 1H19 DPS has already been announced,” BCS GM commented.
The revenues of Tatneft were flat q/q at $3.4bn, despite 9% q/q increase in oil price, due to 20% export duty q/q increase and issues related to crude contamination in Druzhba pipe- line system.
e lower sales and higher taxes had Ebitda in 2Q19 decrease by 9% q/q to $1.2bn (8% below consensus), “which is worse than the corre- sponding metrics of other oil producers in Rus- sia in 2Q 19 – Lukoil (+14% q/q), Rosne (-5% q/q) and Gazprom Ne (+2% q/q),” BCS GM compares.
However, Tatne increased its net cash posi- tion to about $1.65bn due to positive adjusted free cash ow and ruble appreciation.
In September 2018 Tatne approved a 2030 strategy which includes the construction of RUB70.6bn ($1bn) gas chemical complex by
2024, boosting oil output to 38.4mn tonnes by 2030, and spending RUB799bn in capex in the extraction and RUB194bn in re ning from 2019 to 2030. As a result, Tatne anticipated market capitalisation to rise to $36bn by 2030.
“ e new targets sound very supportive of Tatne ’s investment case, especially with respect to the production growth plans and substantially increased FCF outlook,” Aton Equity argued back in September 2018.
Aton reminded that “Tatne is distinguished by its very investor-friendly dividend policy suggesting 100% of disposable FCF distribu- tion, and making it one of the most attractive dividend stories in the Russian O&G space.”™
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