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FSUOGM PERFORMANCE FSUOGM
Surgutneftegaz grows cash pile despite loss in 1H19
RUSSIA
Currency uctuations affecting the company’s cash pile were to blame for the loss.
RUSSIA’S oil company Surgutne egaz (Surgut) reported a net loss of $238mn in 1H19 under IFRS with revenues declining by 7% to $14.3bn and Ebitda inching down by 2% to $3.9bn.
As usual, Surgut had its results a ected by currency uctuations, with 9% ruble apprecia- tion leading to $4.7bn FX loss and revenues div- ing on the decrease of oil price in USD terms. However, Ebitda remained resilient due to posi- tive export duty lag.
e main indicator in focus with Surgut is its notorious cash reserve that increased 14% to $52bn, while delivering a positive free cash ow (FCF) of $1.77bn at an annualised cash ow yield of 20%.
BCS Global Markets on August 30 com- mented that Surgut’s results as positive, wel- coming the surprise cash ow increase and the build-up in the cash pile, attributing it to ruble
appreciation and as dividends were paid in July. e famously opaque company that is nev- ertheless close to the Kremlin grew its cash pile by 32% in 2018 to over RUB3 trillion, making the highest value since 2013. As reported by bne IntelliNews, the company’s cash reserves are almost on par with the funds kept in the sover-
eign National Welfare Fund.
Surgut’s huge cash pile has made it an inves-
tors’ darling (for the preferred shares), despite the fact that company is notoriously secretive and shares little information with investors.
However, the “reduced ruble volatility due to the budget rule, Surgutne egaz’s preferred shares have become somewhat less attractive as a defensive asset, in our view,” Sberbank CIB analysts warned this month. BCS GM has a Hold recommendation on Surgut shares at a target price of $4.6.
Gazprom H1 profits up on forex gains
RUSSIA
Revenues were down slightly amid weaker sales to Europe.
RUSSIA’S state gas supplier Gazprom saw income rise by 16% year on year in the second quarter to RUB300.6bn ($4.55bn), the company reported on August 29.
Finance expenses came in at RUB55.5bn, compared with RUB287.4bn a year earlier, re ecting a gain arising from foreign exchange rates. However, revenues edged down 2.7% to RUB1.83tn, while operating costs rose 2.2% to RUB1.41tn. is caused operating pro ts to dip 22% to RUB322bn.
First-half results were better, with net income swelling to RUB836.5bn, up 33% y/y, on the back of favourable foreign exchange rates and a 1.6% uptick in revenues to RUB4.08tn.
Prices at European gas hubs have fallen this year, but Gazprom is shielded somewhat by its oil-indexed supply contracts, which are priced with a six-to-nine month delay to crude bench- marks. Prices were therefore higher as a result of last year’s oil price growth – much to the frustra- tion of some of its customers.
Gazprom’s average price on the continent grew 10.6% y/y to RUB15,331 ($230) per 1,000 cubic metres in the rst half, despite sales vol- umes slumping 8.3% to 117.9bn cubic metres.
Its supply contracts began to re ect lower oil prices in the second quarter, however, explaining the dip in revenues. Spot sales were also a ected by weak hub prices, caused in part by rising European LNG imports.
Sales in Russia, where Gazprom recently gained the right to sell more gas at unregulated prices, were down 2.5% in volume terms at 126.4 bcm in the rst half, but rose 4.5% in terms of price to RUB4,101 per 1,000 cubic metres.
Gazprom saw its European market share eroded this year by the arrival of a tide of US LNG. Increased LNG supplies by Novatek, Gaz- prom’s main domestic rival, also played a role. e company aims to consolidate its position as the continent’s leading gas supplier with the launch of the Nord Stream 2 gas pipeline, tenta- tively scheduled for the end of this year.
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w w w . N E W S B A S E . c o m Week 35 04•September•2019
