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Financial results for Q1 2016

08 June 2016
  • Generating FCF at RUB 80 bln, high operating cash flow at RUB 234 bln, with average Urals price at 32 USD/bbl
  • Increase in EBITDA margin up to 26% in conditions of crude oil price decline
  • Decrease in lifting costs per unit by 1.3% to 155 RUB/boe with CPI exceeding 7%
  • Decrease in net debt by 44.8% to USD 23.9 bln from Q1 2015

Consolidated IFRS financial results for Q1 2016:

 Q1
2016
Q4
2015
Change, % Q1
2016
Q1
2015
Change, %
Financial results RUB bln (except %)
Total revenue and equity share in profits of associates and joint ventures    1,048 1,196 (12.4)% 1,048 1,321 (20.7)%
EBITDA 273 278 (1.8)% 273 319 (14.4)%
EBITDA margin 26.0% 23.2% 2.8 p 26.0% 24.1% 1.9 p
Net income attributable to Rosneft shareholders 14 53 (73.6)% 14 56 (75.0)%
Net income margin 1.3% 4.4% (3.1) p 1.3% 4.2% (2.9) p
Free cash flow 1 80 140 (42.9)% 80 130 (38.5)%
Upstream operating expenses/boe 155 165 (6.1)% 155 157 (1.3)%
             
  USD bln2 (except %)
Total revenue and equity share in profits of associates and joint ventures    14.5 18.6 (22.0)% 14.5 21.5 (32.6)%
EBITDA 3.7 4.3 (14.0)% 3.7 5.0 (26.0)%
Net income attributable to Rosneft shareholders 0.2 0.8 (75.0)% 0.2 1.0 (80.0)%
Gross debt 47.5 45.6 4.2% 47.5 56.0 (15.2)%
Net debt 23.9 23.2 3.0% 23.9 43.3 (44.8)%
Free cash flow 1.5 2.5 (40.0)% 1.5 2.5 (40.0)%
For reference            
Average Urals price, USD per bbl 32.2 41.9 (23.3)% 32.2 52.8 (39.1)%
Average Urals price, th.RUB per bbl 2.40 2.76 (13.2)% 2.40 3.28 (26.9)%

1 Excluding the effect of interest expense and effect from prepayments under long-term supply oil agreements.
2 Calculated using average monthly Central Bank of Russia exchange rates for the reporting period. Gross debt and net debt are estimated using the closing exchange rate of Central Bank of Russia as of March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

Commenting the results for Q1 2016, I.I. Sechin, Chairman of Rosneft Management Board, said:

“With remaining inflation process in the economy and negative market conditions the Company improved the implementation of strategic initiatives with the focus on the business efficiency. Lifting costs were down to 155 RUB/boe (2.1 USD/boe) in Q1 2016 compared to Q4 2015 and Q1 2015, which contributed to improvement in EBIDTA margin. Rosneft has a strong lead in upstream capex and opex at 4.1 USD/boe and 2.1 USD/boe, respectively, with Russian and foreign peers exceeding the Company’s levels by 2-8 times. The Company keeps generating positive free cash flow despite capex went up by 20% driven by intensive development of new projects in Upstream. In conditions of negative macroeconomic environment the Company sustains stable level of operating cash flow which supports financing of planned capital investments and timely meeting of all liabilities”.

Financial performance

Total revenue and equity share in profits of associates and joint ventures

In Q1 2016 revenues amounted to RUB 1,048 bln (USD 14.5 bln), declining by 12.4% compared to Q4 2015 due to decreased crude oil prices by 13.2% in RUB terms. The Company efficiently used high margin trading channels for crude oil and oil products and managed to compensate negative effect from price decline and fully met the obligations under long-term oil supply agreements and the obligations for petroleum products sales on the domestic market.

In Q1 2016 gas sales increased by 13% compared to Q4 2015 thanks to efficient management of contracts portfolio which compensated for negative effect from deteriorating market conditions.

EBITDA

In Q1 2016 lifting costs amounted to 155 RUB/boe (2.1 USD/boe ) which was lower than in Q4 2015 and Q1 2015.

In Q1 2016 income before interests, income tax and depreciation (EBITDA) amounted to RUB 273 bln, declining by 1.8% vs Q4 2015. In conditions of crude oil price decline by 13.2% in RUB terms, negative effect of increased tax burden from January 1, 2016, and growth in tariffs of natural monopolies (av. 6-12%) the Company increased EBITDA margin up to 26% driven by an improvement in cost management and sales structure.

EBITDA decreased by 14.4% compared to Q1 2015 due to negative effects of external factors (crude oil price decline (RUB - 110 bln), higher tax burden effect (RUB - 22 bln)) which were not sufficiently offset by RUB depreciation.

Net income attributable to Rosneft shareholders

In Q1 2016 net income was at RUB 14 bln. Decline of net income compared to RUB 53 bln in Q4 2015 resulted from EBITDA decrease, mentioned above, and from recognition of one-offs from insurance compensation and sales of investments in the total amount of RUB 38 bln in other income at the end of 2015.

Capital investments

In Q1 2016 capital expenditures amounted to RUB 154 bln (USD 2.1 bln) which was 17% lower compared to Q4 2015 due to seasonal factor.

20% growth in capital expenditures in Q1 2016 compared to Q1 2015 was in line with Company’s business plan for 2016-17 approved by the Board of directors in December 2015, resulting from increased wellworks to launch Suzun and Yurubcheno –Tokhomskoe fields and from extensive wellworks at Rospan license areas.

Free cash flow

In Q1 2016 free cash flow was at RUB 80 bln (USD 1.5 bln) which was down by 38.5% compared to Q1 2015 due to lower EBITDA and increase in capital expenditures in comparison to last year. Meanwhile, despite of 40% drop in oil price the Company keeps leadership in free cash flow generation at 3.2 USD/boe.

Debt burden

Since the end of Q1 2015 net debt was down by 44.8% in USD terms and amounted to USD 23.9 bln. Net Debt/EBITDA ratio was at 1.23x in USD terms as of the end of Q1 2016. The Company reduced net debt twofold and boosted dividends by 43% while foreign peers were mainly raising debt burden to maintain the dividend payments.

Rosneft Information Division
tel.: +7 (495) 411 54 20
 fax: +7 (495) 411 54 21
 June 08, 2016

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.