Page 4 - FSUOGM Week 07 2021

FSUOGM COMMENTARY FSUOGM

Rosneft suffers 80% slump in 2020

profits, Q4 numbers better

Rosneft closed two major deals at its Vostok Oil megaproject in the fourth quarter

RUSSIA RUSSIA’S biggest oil producer Rosneft suffered
a near 80% drop in net profit in 2020, it reported
WHAT: on February 12, as the coronavirus (COVID-19)
Rosneft's 2020 numbers pandemic sapped fuel demand and caused prices
were weaker as a to collapse.
result of low prices and The state-owned firm reported a RUB147bn
production cuts. ($2bn) net income for the year, versus
RUB705mn in 2019. Beyond weaker prices,
WHY: its oil and condensate production was cut by
The company had to scale 11.1% to 4.11mn barrels per day (bpd), owing
back output because to Russia’s OPEC+ commitments. Rosneft’s 2020
of Russia's OPEC+ revenues sank 33.6% to RUB5.76 trillion, while
commitments. EBITDA was down 42.6% at RUB1.2 trillion.
Rosneft’s numbers were stronger in the fourth
WHAT NEXT: quarter, with the company returning to a net closure in late December of the sale of a 10%
Rosneft will follow profit of RUB324bn, after booking a RUB64bn stake in its flagship Vostok Oil project in the
through on its dividend loss in the previous three months. Its net income Russian Arctic to commodities trader Trafigura,
policy, after better in the final quarter of 2019 was RUB158bn. as well as one-off cash items.
performance in the fourth EBITDA was more or less unchanged quarter Rosneft sold the 10% interest to Trafigura
quarter. on quarter at RUB364bn, but was down 25% for €7bn, according to financial records, and
year on year. It was also 6% below the forecast of this deal allowed “for the practical start of the
VTB Capital, due to higher operating and selling execution of the project,” Sechin said. The com-
general and administrative expenses. pany is in talks with other potential partners,
Rosneft made a $0.8bn foreign exchange First vice-president Didier Casimiro said on
gain, and $6.6bn from the acquisition of the an investor call, noting that international trad-
assets of Taymyrneftegaz, now part of the com- ing houses, global oil majors and oil-importing
pany's flagship Vostok Oil project. These assets countries like India were all interested in partic-
include the Payakha fields and other assets ipation. Indian state companies ONGC Videsh
in the Russian Arctic formerly held by Neft- Ltd (OVL), Oil India, Indian Oil and Bharat Pet-
egazholding, a private producer controlled by roresources are already partnered with Rosneft
former Rosneft president Eduard Khudainatov. at the Vankor oilfield, one of the main assets that
The Payakha fields also serve as part of Vostok will be included in Vostok Oil.
Oil and contain over 7.3bn barrels of crude. Rosneft is banking on Vostok Oil to deliver
Rosneft also transferred to Neftegazholding a future dividends and shareholder value. The pro-
number of mature assets further south as part ject, valued at $85bn, is expected to flow around
of the deal. 500,000 bpd by 2025 and twice that amount by
Rosneft is set to pay RUB716bn ($9.6bn) for 2027. Five exploration wells are to be drilled in
the assets to private group Neftegazholding, of 2021, Rosneft told investors.
which RUB615bn has already settled. However, Rosneft's bottom line was positive through-
Rosneft also booked a $4.3bn loss from the sale out 2020, and so its management will recom-
of mature assets further south to Neftegazhold- mend the board pays dividends for the year in
ing. These assets included Varyoganneftegaz, line with its policy. Earlier it cancelled interim
Severovaryeganskoye, Nizhnevartovsk Oil and payouts.
Gas Production Enterprise, RN-Sakhalinmor- “Despite all the difficulties of 2020, the com-
neftegaz and RN-Severnaya Neft. Together they pany has achieved a net income, which will be
flow around 10-12mn tonnes (200,000-240,000 the basis for the distribution of dividends in
bpd) of oil. accordance with the dividend policy,” CEO Igor
Rosneft also made a cash gain from the Sechin said in a statement. ™

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