Page 115 - RusRPTJun19

and the Duma to express their dissatisfaction if Gazprom can't get future project costs under control.”
● Rosneft
Russia's largest crude oil producer state-controlled Rosneft posted 62% year-on-year jump of net profit to RUB131bn in 1Q19 (up 39% y/y to $1.99bn in US dollar terms), the company said on May 13. Despite the output decline in the reporting quarter, Rosneft managed to post 3.5% quarter-on- quarter increase in crude sales on seasonal destockings. Average Brent oil price dived 7% q/q on average in the reporting quarter, but Rosneft's revenues decline by just 3% q/q to $31.5bn, broadly in line with BCS Global Markets expectations. Company's Ebitda in 1Q19 amounted to about $8.5bn and increased 15% q/q beating BCS and consensus estimates by 7%-8%, mostly on 38% lower q/q export duty offsetting lower oil price and just a minor worsening in refining profitability. BCS has Buy recommendation on Rosneft's shares at a target price of $9 per GDR. Net income, though, came in slightly below expectations, as it was affected by write-offs and impairments and FX & derivatives gain. Company's Free Cash Flow (FCF) remained positive at $3bn in 1Q19, but despite the 17% decline in capital expenditure to $3.24bn, FCF did not exceed $4bn seen in the 4Q18 in the absence of working capital release. Rosneft's net debt excluding prepayments amounted to about $37bn, down by $1.6bn q/q, "on the back of positive FCF and given that the interim DPS (c$1.85bn) were paid in 4Q18," BCS GM commented. In April Rosneft's BoD recommended a final dividend of RUB11.33 ($0.18) per share for 2018, implying a 2.6% yield. "The final dividend is in line with our expectations. The total dividend for 2018 therefore amounts to RUB25.9 per share (including a the first half of 2018 interim DPS of RUB14.58), or 50% of IFRS net income, in line with the dividend policy. This implies a total dividend yield of 6.0% for 2018," Andrey Gromadin of VTB Capital (VTBC) said in a note on April 26. "We expect the company to continue paying out dividends in keeping with its dividend policy, projecting total yields of 7% and 9% for 2019 and 2020, respectively. We forecast annual free cash flow (FCF) generation of $12bn- 13bn in 2019-20, almost double our expected dividend payout," VTBC commented.
Russia's largest oil major state-controlled Rosneft could benefit from mineral extraction tax (MET or NDPI) discounts for its largest Priobskoye oil field in the Khanty–Mansi region of Western Siberia, Kommersant daily reported on May 28 citing unnamed sources. The field yields about 24mn tonnes of oil extracted annually and accounts for 11% of all Rosneft's extraction of 214mn tonnes in 2018. The RN-YuganskNefteGas extraction subsidiary that operates Priobskoye, among other fields, brings 32.7% of Rosneft's total crude output. Reportedly the decision to classify the Priobskoye as a field with challenging extraction conditions, and thus eligible for MET discounts for 10 years, was taken at a meeting with Prime Minister Dmitry Medvedev and is linked to previous request by Rosneft's notorious head Igor Sechin to support the company addressed to the President Vladimir Putin. Notably, in February 2019 the Finance Ministry opposed giving Priobskoye any additional benefits, arguing that the company already benefits from 80% discounts on MET on certain wells, and estimating the potential loss to the budget at RUB460bn ($7bn). Rosneft posted 62% year-on-year jump of net profit to RUB131bn in 1Q19 (up 39% y/y to $1.99bn in US dollar terms), the company said on May 13. The company benefited from 38% q/q lower export duties offsetting lower oil prices to post 15% q/q gain in Ebitda in 1Q19 of about $8.5bn, beating consensus estimates by 7%-8%. BCS Global Market
115 RUSSIA Country Report June 2019 www.intellinews.com