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Russia’s Novatek maintains stable results in

second quarter on foreign exchange gains

PERFORMANCE RUSSIA’S second-largest natural gas producer sales of LNG of 2.5 bcm, flat q/q and off 32% y/y).
and LNG leader Novatek reported IFRS results Total revenues of $2.00bn were down 27%
for the second quarter of 2020, showing $2bn q/q and off 40% y/y, driven by gas revenues that
in total revenues, $0.99bn total Ebitda (includ- were 29% lower q/q at $1.06bn and total liquids
ing joint ventures such as Yamal LNG) and net revenues that fell 29% q/q to $0.89bn.
income of $0.58bn. “In general, Novatek’s overall downbeat
The company beat the consensus expec- financial performance compared with 2Q19 was
tations on top and bottom lines by 2% and 7% defined by the adverse macro environment and Novatek has
respectively. weaker operating data,” VTB Capital (VTBC)
Novatek has completed Russia’s largest LNG commented on July 30, noting adverse pricing completed
project, Yamal LNG, and is developing the Arctic environment.
LNG-2 project. Previous reports have suggested Novatek also posted a negative free cash flow Russia’s largest
that more co-operation with foreign energy (FCF) of -$0.8bn in 2Q20 as capital expenditure
majors on LNG projects is possible. in the reporting quarter rose from $0.5bn to LNG project,
“As usual in times of a volatile ruble exchange $0.9bn. Yamal LNG, and
rate, Novatek’s net income line was heavily BCS GM maintained a Buy recommendation
impacted by Forex gains and losses in its core on the name with target price of $210 per global is developing
and JV operations,” BCS Global Markets com- depository receipt (GDR).
mented on July 30. The analysts at BCS GM suggest focus- the Arctic LNG-2
The forex line at the parent company went ing on the current LNG market environment,
from a $2.1bn gain in 1Q20 to a $0.78bn loss in “especially as to how that may impact signing project.
2Q20. But overall contributions from JVs swung long-term sales contracts for Arctic LNG-2 and
from a $2.2bn loss in 1Q20 to a $1.00bn gain in development plans for the several other LNG
2Q20. projects Novatek has on the drawing board,”
In 2Q20 Novatek’s gas output was down by as well as the progress on Arctic LNG-2 and
3% quarter on quarter and down 2% year on Train-4 at operating Yamal LNG project.
year at 18.5bn cubic metres. Gas sales, including VTBC, in turn, maintains the Hold recom-
the effect of purchases from subsidiaries of both mendation on Novatek’s GDRs with target price
piped gas and LNG, were off 18% q/q and off of $165 per GDR, implying a 12% estimated total
10% y/y at 16.9bcm (gas sales included reported return (with 1.4% dividend yield assumption).™

Week 30 31•July•2020 www. NEWSBASE .com P15