Page 110 - RUSRptApr17

9.2 Major corporate news 9.2.1 Oil & gas corporate news
US oil major ExxonMobil has applied to the US Treasury Department seeking a waiver from Russian sanctions in order to resume joint ventures with Kremlin-controlled oil major Rosneft, the Wall Street Journal reported on April 19, citing sources familiar with the matter. Reportedly ExxonMobil renewed its efforts to have the projects approved shortly after its former CEO Rex Tillerson became US secretary of state in February. ExxonMobil, along with ConocoPhillips, was one of the first foreign hydrocarbon majors to start operations in Russia, and also the first to pull out because of international sanctions imposed over Russia’s annexation of Crimea in 2014.
Russia’s second-largest gas producer independent Novatek reported net IFRS profit of RUB71bn (€1.2bn) for the first quarter of 2017, the company said on April 26, beating consensus analysts’ estimates of RUB62bn. The higher than expected net profit is attributed to lower net currency loss (down almost four-fold quarter-on-quarter to RUB3.8bn), and increased profit from joint ventures (RUB44bn), and lower effective tax rate of 9%, according to Gazprombank’s report of April 27. The company increased the revenues by 7.2% q/q to RUB155bn ($2.6bn) on the back of a stronger oil price and netbacks, with Ebitda of RUB53.8bn and a margin of 35%. Novatek also continued to generate strong free cash flow estimated at about $770mn by the bank, due to reduced capex and reduced leverage, now below 1.0x. Gazprombank estimates current net debt/LTM Ebitda ratio of the company in US dollar terms at 0.7x as of end of the first quarter and 0.6x in RUB terms.
Gazprom, Russia’s state-run gas group, is considering moving its trading and marketing operations out of the UK after the country leaves the EU amid fears of losing preferential access to the European market as a result of a “hard” Brexit. The world’s largest natural gas producer is concerned that its ability to trade gas in the EU, by far its most important export market, could be curbed or made more costly as a result of remaining in London, according to two people with knowledge of the company’s thinking. “Running our European trading operations out of London is not advantageous any longer,” said one of the people, who declined to be identified as the review process is not public. “We have to look at the impact and our options.”
Gazprom issues with Belarus were settled by the presidents of the countries. Belarus is to return $700mn and get gas discount for 2018-19, although the size of the discount was not disclosed and is the key risk for the 2018-19 forecast. Gas deliveries after 2019 are to require separate negotiations. The key question is the amount of the discount that Gazprom might provide to Belarus in 2018-19. That could visibly affect Gazprom’s financials, and the forecasts, given that Belarus is the largest Russian gas consumer in the FSU region, purchasing some 20bcm annually. VTBC now forecast the average gas price for Belarus at $120/kcm for 2018-19F. Every $10/kcm discount would eat around $200mn of Gazprom’s EBITDA in the respective year (c.1%).
Gazprom has signed a contract on the expansion of the Sakhalin-Khabarovsk- Vladivostok (SKhV) gas pipeline capacity for RUB
110 RUSSIA Country Report April 2017 www.intellinews.com