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Rosneft posts EBITDA of USD 3.7 bln, crude oil production growth of 4.1% in Q3 2009

25 November 2009

On November 25, 2009 Rosneft reported its consolidated financial results under US GAAP for Q3 and 9M 2009.

 Q3 2009Q2 2009Change, %9M 20099M 2008Change, %
Revenue, USD mln 13,048 10,947 19.2% 32,259 58,192 -44.6%
 
EBITDA, USD mln 3,659 3,574 2.4% 9,551 17,076 -44.1%
Net income, USD mln 1,168 1,612 -27.5% 4,840 10,345 -53.2%
 
Crude oil production, th. bpd 2,214 2,127 4.1% 2,151 2,119 1.5%

In Q3 2009 Rosneft’s revenues increased by 19.2% quarter-on-quarter, to USD 13,048 mln. The increase was due to higher crude oil and petroleum product prices, growth of crude oil production volumes and refinery throughput. In 9M 2009 revenues amounted to USD 32,259 mln, a decrease of 44.6% year-on-year. The decrease was primarily attributable to a drop in average crude oil and product prices.

Rosneft’s EBITDA amounted to USD 3,659 mln in Q3 2009, a 2.4% increase quarter-on-quarter. Moderate EBITDA growth in spite of the strong increase in revenues and steady cost control resulted from growth of the export customs duty, mineral extraction tax and transport tariffs, which together increased by USD 2,050 mln quarter-on-quarter while revenues grew by USD 2,101 mln. Continuing RUB appreciation against the USD was another negative factor for Q3 results. EBITDA was USD 9,551 mln in 9M 2009, 44.1% below the level of 9M 2008.

Net income was USD 1,168 mln in Q3 2009, 27.5% lower quarter-on-quarter. The decline was primarily a result of the effective income tax rate growth from 20% to 37% following the continuing nominal appreciation of the RUB against the USD (the rate for Q3 includes the adjustment for the difference between 20% and effective rate of 12% applied in 1H 2009, as the estimated rate for 2009 grew from 12% to 20%). Increased depreciation, depletion and amortization due to the launch of the Vankor field, growth of interest expense due to the decrease in capitalized interests and creation of reserve for the Russian Federal Antimonopoly Service claims were other main factors of decreased net income.

In 9M 2009 Rosneft continued to decrease its net debt. As of the end of September 2009 net debt was USD 18,862 mln, a decrease of USD 2.4 bln compared to December 31, 2008. The decrease reflects strong free cash flow generation which amounted to USD 2.2 bln in 9M 2009.

In Q3 2009 Rosneft’s daily crude oil output (including production by subsidiaries and share in production by affiliates) increased by 4.1%, to 2,214 th. barrels per day (bpd), from 2,127 th. bpd in Q2 2009. The growth was driven by the launch of commercial production at the Vankor field in July 2009, contributing 104 th. bpd during Q3 2009. Crude oil production at Vankor averaged 148 th. bpd in September and reached 160 th. bpd in October. In Q3 2009 Rosneft produced 12.01 mln tonnes of petroleum products, up 3.1% quarter-on-quarter.

In Q3 2009 Rosneft continued its successful implementation of cost optimization measures. Upstream operating expenses were USD 2.62 per barrel compared with USD 2.51 per barrel in Q2 2009. The increase resulted from the real appreciation of the RUB of 4.6% and launch of commercial production at the Vankor field. Per barrel costs at Vankor were higher than Rosneft's average as production volumes were low compared to the target capacity of the project. Rosneft management expects these costs to decrease to a level significantly below the average for the Company’s portfolio as Vankor production continues to grow in the next few quarters. Operating expenses of the Company’s refineries were USD 14.6 per tonne in Q3 2009, a decrease of 6.1% quarter-on-quarter, which resulted from decreased volume of turnaround works and optimization of headcount. General and administrative expenses were USD 348 million, 4.9% lower than in Q2 despite appreciation of the RUB against the USD. The decrease resulted from the reduced expenses related to construction activities at Vankor following the launch of Vankor - Purpe pipeline, as well as from reduction in compensation payments and reversal of bad debt allowance.

Commenting on the results, Rosneft’s President Sergey Bogdanchikov said: «Commercial production launch at the Vankor field in Eastern Siberia, Rosneft’s key investment project, was our greatest achievement in Q3 2009. The field was launched on schedule and is performing above expectations allowing us to confirm with confidence our production target for the year. We are also pleased with our success in maintaining industry low operating and SG&A costs. As of today, Q4 also looks to be a strong quarter and we are on track to exceed our plan on all key financial and operating metrics».

Rosneft’s US GAAP financial statements and Management’s Discussion and Analysis (MD&A) for Q3 and 9M 2009 and a related investor presentation are available on the Company’s website at www.rosneft.com.

Rosneft Information Division
Tel.: +7 (495) 221-31-07
Fax: +7 (495) 411-54-21
n_manvelov@rosneft.ru
November 25, 2009

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.