Page 142 - RusRPTNov21

● Rosneft
Rosneft announced that it had closed the sale of 5% in Vostok Oil to a consortium of Vitol (75%) and Mercantile & Maritime Energy (25%). The deal does not require additional approvals from the Federal Anti-Monopoly Service. The sale was announced previously. The valuation has not been disclosed, but in December 2020 a 10% stake was sold to Trafigura for €7bn. In our view, the market might perceive the news broadly neutrally (Rosneft’s share price rose 1.4% yesterday vs. 0.9% for the RTS O&G). We believe the proceeds will likely go towards the capex of the project. This capex is set to translate into actual production growth beyond 2024, so we do not expect any effect on the company’s operations or financials in the near term.
Rosneft CEO Igor Sechin and BP CEO Bernard Looney have discussed potential gas supplies from Rosneft to BP under an export agreement. Thus, in Rosneft’s pilot 10bcm gas export project, the supplies might be sold to BP. Separately, the Russian president’s press secretary commented that Vladimir Putin had not yet made a decision on whether to approve Rosneft’s admission to gas exports. Overall, we treat the news as neutral for Rosneft as the parties were discussing an existing agreement. To recap, back in 2016, BP and Rosneft signed a memorandum, in which the companies agreed on gas supplies conditional on Rosneft receiving gas export rights . However, in general if Rosneft is allowed to export gas, that would be supportive for the perception of the stock, although only marginally positive for the company’s financials, we think. To recap, it was reported that the Russian government was in general ready, as an ‘experiment’, to allow Rosneft to export 10bcm/a of gas to Europe through an agency agreement with Gazprom. Under the setup, Rosneft might pay taxes on gas production based on spot gas prices in Europe, rather than oil-linked prices, which are used to calculate Gazprom’s taxes now. At the same time, as Gazprom is opposed to this scheme, the final decision as to whether to grant Rosneft gas export rights is up to Putin.
● Novatek
Novatek has published its 3Q21 operating update. The company reported a 0.7% y-o-y decrease in natural gas production and 0.4% decline in liquids output in 3Q21. LNG sales in global markets dropped by 22% y-o-y to 1.7 bcm in 3Q21 (total gas sales were flat y-o-y). As of the end of the quarter, the company had 1.8 bcm of natural gas and 713 kt of liquids in storage/inventory. Novatek's 3Q21 upstream operating performance was already mainly known from the monthly industry statistics. The modest drop in both natural gas and liquids output y-o-y was driven by maintenance at Yamal LNG and a higher production base from last year (new capacity launched in 2H20). The inventory accumulation (1.0 bcm of natural gas and 85 kt of liquids) and 29% y-o-y decrease in LNG trading could reduce the 3Q21 margin moderately, reallocating it to 4Q21. As usual, we will publish our formal 3Q21 financial preview for Novatek as part of our quarterly earnings preview for the entire sector.
Novatek CEO Leonid Mikhelson has given a presentation at an LNG conference. The key takeaways are as follows.
142 RUSSIA Country Report November 2021 www.intellinews.com