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Rosneft Posts 50% Growth of EBITDA and Generates USD 3.3 bln of Free Cash Flow

28 April 2011

On April 28, 2011 Rosneft (the “Company”) published its consolidated financial results under US GAAP for Q1 2011.

Q1
2011
Q1
2010
Change,
%
Q4
2010
Change,
%
Revenue, USD mln 20,123 14,761 36.3% 17,384 15.8%
EBITDA, USD mln 6,653 4,443 49.7% 5,377 23.7%
Operating income, USD mln 5,178 3,146 64.6% 3,772 37.3%
Net income, USD mln 3,942 2,492 58.2% 3,056 29.0%
 
Cash flow from operations, USD mln 6,052 2,287 164.6% 3,636 66.4%
Capital expenditures, USD mln 2,761 1,754 57.4% 2,768 (0.3)%
Free cash flow, USD mln 3,291 533 517.4% 868 279.1%
Net debt, USD mln 11,097 18,534 (40.1)% 13,662 (18.8)%
 
Hydrocarbon production, th. boe per day 2,564 2,501 2.5% 2,559 0.2%
Crude oil production, th. bpd 2,355 2,288 2.9% 2,352 0.1%

In Q1 2011, Rosneft’s revenues increased by 36.3% year-on-year, to USD 20,123 mln. The increase was due to higher crude oil and petroleum product prices as well as due to the growth in sales volumes by 4.9%.

Rosneft’s EBITDA amounted to USD 6,653 mln in Q1 2011, which is 1.5 times more compared with Q1 2010. The increase was mainly driven by revenue growth. However, it was tempered by the rise in transportation and electricity tariffs, real strengthening of the rouble against the USD and growth of tax payments.

In Q1 2011, net income was USD 3,942 mln, up 58.2% compared with USD 2,492 mln in Q1 2010. Rosneft continued to generate material free cash flow, which increased by more than 6 times year-on-year and reached a record high of USD 3,291 mln. As a result, the Company’s net debt decreased to USD 11.1 bln.

In Q1 2011, Rosneft’s average daily crude oil output (including production by subsidiaries and share in production by affiliates) increased by 2.9% year-on-year, to 2,355 th. barrels per day, which is 2% higher than planned. The Company’s Vankor field was the main growth driver. Other growth contributors were Yuganskneftegaz, Samaraneftegaz, Verkhnechonsk field in the Eastern Siberia and Sakhalin-1 project.

Petroleum product output by Rosneft was 11.8 mln tonnes in Q1 2011, which is 2.5% less year-on-year. The decline resulted from lower refinery throughput at the Tuapse Refinery following the decommissioning of a crude distillation unit in the end of 2010.

Rosneft maintained tight control over costs. SG&A costs fall by 15.8% quarter-on-quarter to USD 2.0 per barrel of production. Unit lifting costs declined by 1.3% quarter-on-quarter to USD 2.95. Unit refining costs rose to USD 2.2, or by 3.1% despite the real rouble appreciation of 9.3%.

The Company’s success in cost cutting was muted by increases in tax payments, transportation and electricity tariffs. In Q1 2011, total accrued taxes and export duties rose to USD 8,688 mln, which is USD 2,122 mln higher year-on-year. Transportation costs were up due to the increase in pipeline transportation tariffs by 13.5% year-on-year and growth of rail transportation tariffs by 8.0%. Average electricity tariffs for Rosneft grew by 27% year-on-year due to lower volumes of power purchases at the regulated market and higher tariffs at the unregulated market.

Commenting on the results, Rosneft’s President Eduard Khudaynatov said: “The price environment on the international market was very supportive in Q1, allowing us to achieve record high financial results. Strict cost control and further optimization of business processes remained our priorities in the quarter and made their contribution to the growth rates. We also achieved further progress in upgrading our refining capacities”.

Rosneft Information Division
            Tel.: +7 (495)-221-31-06
            v_voevoda@rosneft.ru
            April 28, 2011

Financial information in this press-release does not constitute interim consolidated financial statements. Rosneft’s US GAAP financial statements and Management’s Discussion and Analysis (MD&A) for Q1 2011 and a related investor presentation are available at the Company’s website at www.rosneft.com.

These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.