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Financial results for 2Q 2020 and 1H 2020

14 August 2020
  • Net income in 2Q 2020 amounted to RUB 43 bln compared to negative Net income of RUB 156 bln in 1Q 2020
  • In 1H 2020 Rosneft free cash flow was RUB 206 bln
  • Upstream operating expenses of 199 RUB/boe remained unchanged in 1H 2020 against the backdrop of crude oil production limitations
  • Reduction of financial debt and trading obligations in 1H 2020 amounted to 5.3% or nearly USD 4.3 bln
  • Reduction of interest expenses in 1H 2020 by 21% or by RUB 22 bln compared to 1H 2019
  • Available credit lines and liquid financial assets exceeded short-term debt by 28%

Consolidated IFRS financial results for 2Q 2020 and 1H 2020

 2Q 20201Q 2019Change, %1H 20201H 2019Change, %
  RUB bln (except %)
Revenues and equity share in profits of associates and joint ventures 1,039 1,765 (41.1)% 2,804 4,212 (33.4)%
EBITDA 170 309 (45.0)% 479 1,063 (54.9)%
EBITDA margin 15.8% 17.2% (1.4) p.p. 16.7% 24.9% (8.2) p.p.
Net income/(loss) attributable to Rosneft shareholders  43 (156) (113) 325
Net income margin 4.1% (8.8)% (4.0)% 7.7%
Capital expenditures 182 185 (1.6)% 367 436 (15.8)%
Free cash flow (RUB equivalent)1 (13) 219 206 349 (41.0)%
Upstream operating expenses RUB/boe 208 191 8.9% 199 199
    USD bln2 (except %)
Revenues and equity share in profits of associates and joint ventures 14.9 27.6 (46.0)% 42.5 65.5 (35.1)%
EBITDA 2.5 4.9 (49.0)% 7.4 16.3 (54.6)%
Net income attributable to Rosneft shareholders 0.7 (2.0) (1.3) 4.9
Capital expenditures 2.5 2.8 (10.7)% 5.3 6.7 (20.9)%
Free cash flow (0.1) 3.5 3.4 5.3 (35.8)%
Upstream operating expenses USD/boe 2.9 2.9 2.9 3.1 (6.5)%
For reference
Average Urals price.USD per bbl 31.2 48.1 (35.1)% 39.7 65.5 (39.5)%
Average Urals price. th. RUB per bbl 2.26 3.19 (29.2)% 2.75 4.28 (35.8)%

1The calculation includes interest expense on the prepayments on the long-term oil and petroleum products supply agreements. Previous periods have been adjusted for comparability for net change of subsidiary banks operations in operating activity.
2Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.

Commenting on 2Q 2020 financial results Rosneft’s Chairman of the Management Board and Chief Executive Officer Igor Sechin said:

The reporting period was characterized by unprecedented macroeconomic conditions including a sharp reduction of prices due to failing demand on the back of COVID-19 pandemic and lower production volumes due to realization of the new OPEC+ Agreement.

Crude oil and gas production as well as refining volumes came under severe pressure in 2Q 2020 which led to the deterioration of financial metrics. Still in 1H 2020 the Company kept low level of operating expenses and demonstrated a material free cash flow. This enabled us even in the very difficult conditions to fulfill obligations to the shareholders and to continue the implementation of our strategic goal – the reduction of financial debt and trading obligations.

As prices for crude oil and refined products had improved, our financial metrics demonstrated a positive dynamics in the course of 2Q 2020. This provides us confidence that the Company’s financial results will stage a recovery in the upcoming periods.

Financial performance

Revenues and equity share in profits of associates and joint ventures

2Q 2020 revenues and equity share in profits of associates and joint ventures amounted to RUB 1,039 bln (USD 14.9 bln). The reduction in sales in RUB terms compared to 1Q 2020 (-41.1%) was driven by a crude oil price drop (-35.1%) as a result of lower demand in the reporting period due to COVID-19 virus pandemic as well as a reduction in delivery volumes of crude oil in accordance with a new OPEC+ Agreement.

Revenues fell by 33.4% in 1H 2020 compared to 1H 2019 mainly due to a reduction in world crude oil prices (-39.5%) and a decrease of crude oil sales volumes (-10.5%).

EBITDA

2Q 2020 EBITDA amounted to RUB 170 bln (USD 2.5 bln), a reduction by nearly a half in RUB terms compared to 1Q 2020. The decrease was driven by lower crude oil prices (-35.1%), a negative damper effect driven by a reduction of the export net-back price relative to the conditional price of the domestic market of petroleum products (RUB -46 bln), which was offset by a positive impact of the export duty lag due to a sharp drop of crude oil prices in March 2020 (RUB 102 bln).

The decrease in EBITDA compared to 1H 2019 was due to a significant drop of world crude oil prices
(-39.5%), reduction in delivery volumes of crude oil and a negative damper effect (RUB -142 bln) which was partially offset by a positive effect from trading activity and decrease in administrative expenses of 7.2%.

1H 2020 unit upstream operating expenses remained unchanged compared to the same period of 2019 in terms of production decline in accordance with the new OPEC+ Agreement.

2Q 2020 unit upstream operating expenses were 208 RUB/boe (2.9 USD/boe), unchanged in USD terms. The increase of 8.9% in RUB terms compared to 1Q 2020 was mainly due to a scheduled seasonal growth of maintenance and repair of pipelines and oilfield equipment.

Net income/(loss) attributable to Rosneft shareholders

In 2Q 2020 Net income attributable to Rosneft shareholders amounted to RUB 43 bln
(USD 0.7 bln) against the backdrop of the lower operating income due to the negative external factors.

Taking into account 1Q 2020 results, Net profit in 1H 2020 was RUB -113 bln (USD -1.3 bln). If compared to 1H 2019 the reduction was due to negative price fluctuations because of the impact of COVID-19 and the new OPEC+ Agreement as well as due to the negative effect of forex exchange differences (RUB -66 bln).

Capital expenditures

1H 2020 capital expenditures amounted to RUB 367 bln (USD 5.3 bln), a reduction of 15.8% compared to the same period of 2019. The decrease was mainly driven by optimization of the investment program in light of the negative market conditions and the new OPEC+ Agreement from April 2020 aimed at the reduction of crude oil production.

Free cash flow

1H 2020 free cash flow amounted to RUB 206 bln (USD 3.4 bln). A reduction compared to the same period of 2019 was driven by the EBITDA decrease by nearly a half which was partially offset by the lower capital expenditures.

Financial stability

In 1H 2020 financial debt and trading obligations decreased by USD 4.3 bln or 5.3%. Interest expenses reduced by 21% or by RUB 22 bln, and 25% in USD terms compared to 1H 2019. Net debt/EBITDA was 2.09x in USD terms as at the reporting date. Available credit lines and liquid financial assets exceed short term debt by 28%.

Dividends

On July 14, 2020, Rosneft completed the payment of record-high dividends approved by the Annual General Shareholder Meeting of Rosneft Oil Company. Taking into account the payment of interim dividends total dividends for 2019 amounted to RUB 354 bln.

Rosneft Information Division
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
August 14, 2020

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.