Page 119 - RusRPTMay20

Russian gas giant Gazprom suffered a 51.3% year-on-year decline in export revenues in January-February​, data published by Russia’s Federal Customs Service (FCS) shows. Revenues in the two-month period came to $5.05bn, down from $10.4bn a year earlier. Supply volumes also dropped 24.6% to 32.5bn cubic metres. Gazprom has traditionally linked prices in its long-term supply contracts to oil benchmarks with a six-to-nine month delay. But in recent years it has introduced more hub-based pricing and has also launched its own platform for spot gas sales.
Lifting of restrictions related to the coronavirus pandemic would likely lead to global oil demand returning to pre-crisis levels in autumn, Alexander Dyukov, head of Russia’s oil firm Gazprom Neft, told Kommersant newspaper on Tuesday. He also said the possibility of tax breaks for giant oil field Priobskoye in Siberia, which Gazprom Neft taps jointly with Russian energy champion Rosneft, was off the agenda for now due to low oil prices and demand. He said that an optimistic scenario was for oil prices to rise to $40-$45 per barrel by the end of the year with further growth in 2021.
● Rosneft
Rosneft​ might lose the right to new licences for the continental shelf fields​. After the sale of its Venezuelan assets to a Russian state-owned company and the receipt of 9.6% of its own shares as compensation, Rosneft might lose its status of a state-owned company and the right to new licences for continental shelf fields, Kommersant reports. This right is reserved exclusively for companies that are more than 50% state-owned. It is not going to affect the licences that Rosneft already holds for offshore fields, the paper writes. In addition, Rosneft might become exempt from the law on state purchases. That would allow it greater leeway in choosing supplies and contractors. The loss of its status as a government company could also free Rosneft from the mandatory 50% net income payout, currently prescribed by its dividend policy.
● Novatek
Novatek​ has published weak 1Q20 IFRS numbers, which came generally in line with our forecast and below consensus​. Headline EBITDA was affected by a significant non-cash one-off expense due to the revaluation of a contingent consideration related to the sale of a stake in Arctic LNG 2. The stock underperformed peers by 1% yesterday. Our unchanged 12-month Target Price of $133 implies an ETR of 7%: Hold reiterated. Revaluation of Arctic LNG 2 stake. Novatek's revenues declined 21% y/y to $2,781mn in 1Q20, or 2% above our forecast and 2% below consensus. The discrepancy to our revenue forecast came from the slightly higher than expected gas purchases (which added to the gas purchase expense later on) and realised gas prices. On the costs side, materials, services, transportation expenses and nonincome taxes were broadly in line with our forecast. On the back of a decrease in long-term crude oil benchmark prices, Novatek recognised a $0.5bn non-cash revaluation of a contingent consideration related to the sale of a 40% stake in Arctic LNG 2 in 2019 (for details on how the Arctic LNG sale deal was structured, see our in Arctic LNG is in the model now, of 26 April 2019). However, the company stated that the forecast might be revised in future. Therefore, headline EBITDA declined 96% y/y to $206mn in 1Q20. Adjusted for this revaluation, EBITDA dropped 29% y/y to $707mn, or 3%
119​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com