Page 109 - RusRPTMay19

activity in the Arctic region could intensify in the future. ● Novatek
Russia's second-largest natural gas producer and ambitious liquefied natural gas (LNG) runner-up Novatek posted record-high net profit under IFRS of $5.8bn in the first quarter of 2019, soaring by 666% and 752% year- on-year and quarter-on-quarter, respectively. The company cashed in on its second LNG project Arctic LNG-2 in the reporting quarter, selling stakes to its French strategic partner Total and Chinese energy majors. "We expect Novatek to get $2.6bbn from 2 deals with Chinese companies and $0.7bn from deal with Total plus $2.4bn options on 3 deals, which diminishes risk of project’s realization," BCS Global Markets commented on April 26 Company's revenues remained flat q/q at $3.55bn, with Ebitda rising by 4% q/q to $997mn. Novatek showed gas sales including LNG of about 22.2bcm (bn cubic meters), rising 5% q/q, out of which exports rose by 31% q/q to 3.4bcm of LNG. The company maintained a positive cash flow of $328mn and cut net debt by 35% q/q to about $1.3bn. At the same time, BCS GM warns that "Arctic LNG 2’s $13bn equity value [estimated from Chinese deals] may trigger a negative reaction from investors who considered $2.55bn deal with Total as the project’s valuation." BCS analysts suggest focusing on outlook for dividend payout, accelerated ramp up of the first LNG plant Yamal LNG, comments on LNG market environment, as well as progress on Arctic LNG-2. Sberbank CIB on April 26 commented that it anticipates "comments on the binding agreements signed with CNOOC and CNODC on the sale of stakes in Arctic LNG-2, updates on how the negotiations are progressing with regard to the sale of another 10% stake in Arctic LNG-2, as well as details on the tax treatment for the gain booked on the transaction with Total, i.e. the portion of income tax that will be deferred," will be anticipated. Novatek launched its first major LNG project Yamal in 2017 despite Western sanctions against its shareholder and influential Kremlin insider and stoligarch Gennady Timchenko. The company has also adopted an ambitious strategy for LNG growth through 2030 and is now lining up a tanker transportation strategy to back it up.
Russia's second-largest gas producer with ambitious liquefied natural gas (LNG) strategy Novatek lined up another two companies for its upcoming Arctic LNG-2 project. Novatek signed a supplies deal with trader Vitol and Spanish energy major Repsol, the company said on April 2. Arctic LNG 2 is Novatek’s second LNG project with the capacity of 19.8mn tonnes. It is scheduled for commissioning in 2022-2023. The Russian company has already closed the deal to sell a 10% stake in the project to France’s Total. Apart from reported negotiations with Saudi Aramco, companies from Japan and South Korea are also interested in acquiring a share in the plant. Now both Vitol and Repsol closed a 15-year supplies deal for 1mn tonnes of LNG from Arctic LNG 2 and is supposed to pass through Novatek's two new connection terminals in the Murmansk region for its Western delivery route and Kamchatka peninsula for its Eastern destinations.
Russia’s second-largest gas producer and emerging major liquefied natural gas (LNG) player Novatek sold another 20% in its second LNG project Arctic LNG-2 to Chinese CNOOC and CNODC, with 10% stake sold to each, the company said on April 25 without disclosing the value of the deal. Arctic LNG 2 is Novatek’s second LNG project with the capacity of 19.8mn tonnes. It is scheduled for commissioning in 2022-2023. The Russian company has already closed the deal to sell a 10% stake in the project to France’s Total.
109 RUSSIA Country Report May 2019 www.intellinews.com