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Rosneft Posts 54% Growth in Q-on-Q EBITDA; Reduces Short Term Borrowings by USD 5.4 bln in Q2

01 September 2009

On September 1 Rosneft reported its consolidated financial results under US GAAP for Q2 and 1H 2009.

 Q2 2009Q1 2009Change, %1H 20091H 2008Change, %
Revenue, USD mln 10,947 8,264 32.5% 19,211 37,502 (48.8)%
 
EBITDA, USD mln 3,574 2,318 54.2% 5,892 11,750 (49.9)%
Net income, USD mln 1,612 2,060 (21.7)% 3,672 6,876 (46.6)%
 
Crude oil production, th. bpd 2,127 2,110 0.8% 2,118 2,121 (0.1)%

In Q2 2009, Rosneft’s revenue increased by 32.5% quarter-on-quarter to USD 10,947 mln. The increase was due to higher crude oil and petroleum product prices, growth of oil production and refining volumes, and the sale of product inventories following improved domestic demand. In 1H 2009 revenue amounted to USD 19,211 mln, a decrease of 48.8% from USD 37,502 mln in 1H 2008. Lower revenue was primarily due to a two-fold year-on-year drop in average crude oil and product prices.

Rosneft’s EBITDA amounted to USD 3,574 mln in Q2 2009, a 54.2% increase quarter-on-quarter from USD 2,318 mln in Q1 2009. EBITDA growth exceeded the increase in revenue driven by successful cost control and unchanged share of taxes in revenues due to the time lag in calculation of the export duties set by the Russian government. EBITDA was USD 5,892 mln in 1H 2009, 49.9% below the level of 1H 2008.

Net income decreased by 21.7% quarter-on-quarter to USD 1,612 mln, primarily as a result of the effective income tax rate growing from 5.7 to 19.9% and nominal ruble appreciation in Q2, which resulted in a foreign exchange loss of USD 391 mln in Q2 compared with foreign exchange gain of USD 798 mln in Q1 2009.

Net debt decreased in Q2 despite the appreciation of the Russian ruble. It decreased by USD 2,106 mln during 1H 2009 mainly due to strong free cash flow generation which amounted to USD 1,660 mln. Rosneft repaid USD 7.4 bln of debt and reduced short-term borrowings by USD 5.4 bln in Q2 following drawdown of the first USD 5 bln tranche of the China Development Bank loan, the principal repayment of which starts in 2014.

In Q2 2009 Rosneft’s daily crude oil output (including production by subsidiaries and share in production by affiliates) increased by 0.8% to 2,127 th. barrels per day from 2,110 th. barrels per day in Q1 2009 and by 0.5% compared to 2,116 th. barrels per day in Q2 2008. Launch of commercial production at Vankor, the largest greenfield project in Russia has increased Rosneft's daily production to an all-time high of 2,260 th. barrels of crude oil as on the end of August.

In Q2 2009, Rosneft produced 11.65 mln tonnes of petroleum products, up 0.4% quarter-on-quarter and 6.4% year-on-year. The growth was driven by partial recovery of domestic demand (especially for high quality gasoline and diesel) and successful change in output structure. Domestic sales of petroleum products were 4.47 mln tons in Q2 2009 which is higher than 4.05 mln tones in Q1 2009 and lower than 4.79 mln tones in Q2 2008.

In Q2 Rosneft continued cost optimization measures. Upstream operating expenses were USD 2.51 per barrel in Q2 2009 compared with 3.31 USD per barrel in Q2 2008 and 2.37 USD per barrel in Q1 2009. The increase in per barrel expenses quarter-on-quarter matches the change in average RUB/USD exchange rate while the year-on-year decrease considerably outpaces the rate of real ruble depreciation. Refining expenses were USD 2.84 per barrel of throughput in Q2 2009, which is 30.6% lower than USD 4.10 per barrel in Q2 2008 and 13.4% higher compared to USD 2.51 per barrel in Q1 2009. The quarter-on-quarter increase was due to scheduled turnarounds and ruble appreciation.

Commenting on the results, Rosneft’s President Sergey Bogdanchikov said: “With substantial EBITDA growth in Q2 and continuing stabilization of the macroeconomic environment, we are on track to have a strong 2009 thanks to our focus on cost control, prudent planning, and solid execution. In the second half of 2009, we will continue to focus on costs and efficiency and are confident we will deliver average daily production 5% higher than in the first half of the year in large part due to our recent successful launch of production at Vankor. Together these efforts will enable us to continue to provide leading earnings and dividend growth, as well as further net debt reduction”.

Rosneft’s US GAAP financial statements and Management’s Discussion and Analysis (MD&A) for Q2 and 1H 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
September 1, 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.