NOVATEK

Earnings Release • Jul 24, 2019

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RNS Number : 5866G

PAO Novatek

24 July 2019

FOR IMMEDIATE RELEASE

NOVATEK Announces Consolidated IFRS Results

for the Second Quarter and the First Half 2019

Moscow, 24 July 2019. PAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three and six months ended 30 June 2019 prepared in accordance with International Financial Reporting Standards ("IFRS"). 

IFRS Financial Highlights

(in millions of Russian roubles except as stated)

2Q 2019	2Q 2018		1H 2019	1H 2018
215,789	194,818	Oil and gas sales	446,973	373,303
2,724	1,004	Other revenues	5,646	1,922
218,513	195,822	Total revenues	452,619	375,225
(157,507)	(135,606)	Operating expenses	(332,647)	(266,643)
-	-	Net gain on disposal of interests in subsidiaries and joint ventures	308,578	1,645
(247)	(621)	Other operating income (loss)	(1,161)	(519)
60,759	59,595	Normalized profit from operations*	118,811	108,063
69,193	68,958	Normalized EBITDA of subsidiaries*	134,917	125,379
115,835	101,339	Normalized EBITDA including share in EBITDA of joint ventures*	233,777	177,645
(277)	7,380	Finance income (expense)	(6,298)	12,782
23,282	(18,215)	Share of profit (loss) of joint ventures, net of income tax	94,255	(17,052)
83,764	48,760	Profit before income tax	515,346	105,438
69,175	32,041	Profit attributable to shareholders of PAO NOVATEK	450,971	75,162
64,296	54,289	Normalized profit attributable to shareholders of PAO NOVATEK**	130,026	101,199
21.35	18.01	Normalized basic and diluted earnings per share** (in Russian roubles)	43.17	33.57
31,203	22,052	Cash used for capital expenditures	73,679	31,764

* Excluding the effect from disposal of interests in subsidiaries and joint ventures.

** Excluding the effects from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange gains (losses).

Revenues and EBITDA

In the second quarter of 2019, our total revenues amounted to RR 218.5 billion and Normalized EBITDA, including our share in EBITDA of joint ventures, totaled RR 115.8 billion, representing increases of 11.6% and 14.3%, respectively, as compared to the corresponding period in 2018. Our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, during the six months ended 30 June 2019 amounted to RR 452.6 billion and RR 233.8 billion, representing increases of 20.6% and 31.6%, respectively, as compared to the prior year reporting period.

The increases in total revenues and Normalized EBITDA were largely due to the production launch at the second and third LNG trains at Yamal LNG in the second half of 2018.

Profit attributable to shareholders of PAO NOVATEK

Profit attributable to shareholders of PAO NOVATEK increased to RR 69.2 billion (RR 22.97 per share), or by 115.9%, in the second quarter of 2019 and to RR 451.0 billion (RR 149.73 per share), or six-fold, in the first half of 2019 as compared to the corresponding periods in 2018. Our profit was significantly impacted by the recognition of a net gain on disposal of a 10% participation interest in Arctic LNG 2 project in March 2019 in the amount of RR 308.6 billion, and the recognition of non-cash foreign exchange effects on foreign currency denominated loans of the Group and its joint ventures in both reporting periods.

Excluding the effect from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange differences, Normalized profit attributable to shareholders of PAO NOVATEK totaled RR 64.3 billion (RR 21.35 per share) in the second quarter of 2019 and RR 130.0 billion (RR 43.17 per share) in the first half of 2019, representing increases of 18.4% and 28.5%, respectively, as compared to the corresponding periods in 2018.

Cash used for capital expenditures

Our cash used for capital expenditures increased to RR 31.2 billion, or by 41.5%, in the second quarter of 2019 and to RR 73.7 billion, or by 132.0%, in the first half of 2019 as compared to the prior year corresponding periods. A significant portion of our capital expenditures related to the development of our LNG projects (Arctic LNG 2 project prior to March 2019 and the LNG construction center located in the Murmansk region), as well as the North-Russkoye field and crude oil deposits of the East-Tarkosalinskoye and the Yarudeyskoye fields.

Hydrocarbon Production and Purchased Volumes

2Q 2019	2Q 2018		1H 2019	1H 2018
149.0	131.8	Total hydrocarbon production, million barrels of oil equivalent (million boe)	296.1	264.3
1.64	1.45	Total production (million boe per day)	1.64	1.46
18,910	16,418	Natural gas production including proportionate share in the production of joint ventures, million cubic meters (mmcm)	37,570	32,926
9,935	10,562	Natural gas production by subsidiaries	20,034	20,925
7,909	4,420	Natural gas purchases from joint ventures	16,830	12,007
1,971	1,708	Other purchases of natural gas	4,190	3,437
19,815	16,690	Total natural gas production by subsidiaries and purchases (mmcm)	41,054	36,369
3,035	2,928	Liquids production including proportionate share in the production of joint ventures, thousand tons (mt)	6,022	5,864
1,607	1,650	Liquids production by subsidiaries	3,207	3,278
2,366	2,322	Liquids purchases from joint ventures	4,679	4,622
51	56	Other purchases of liquids	107	100
4,024	4,028	Total liquids production by subsidiaries and purchases (mt)	7,993	8,000

Total natural gas production, including our proportionate share in the production of joint ventures, for the second quarter and the first half of 2019 increased by 15.2% and 14.1%, respectively, and our total liquids production increased by 3.7% and 2.7%, respectively, as compared to the corresponding periods in 2018. The main factor positively impacting the production increase was the launch of LNG production at the second and third LNG trains at Yamal LNG in the second half of 2018.

Hydrocarbon Sales Volumes

2Q 2019	2Q 2018		1H 2019	1H 2018
18,764	15,149	Natural gas (mmcm)	40,959	35,412
		including:
15,114	14,496	Sales in the Russian Federation	33,888	33,801
3,650	653	Sales on international markets	7,071	1,611
4,130	4,273	Liquids (mt)	8,106	8,050
		including:
1,841	2,028	Stable gas condensate refined products	3,638	3,594
1,214	1,148	Crude oil	2,341	2,271
674	658	Liquefied petroleum gas	1,351	1,307
396	436	Stable gas condensate	768	872
5	3	Other petroleum products	8	6

In the second quarter and the first half of 2019, our natural gas sales volumes totaled 18.8 billion and 41.0 billion cubic meters (bcm), representing increases of 23.9% and 15.7%, respectively, as compared to the corresponding periods in 2018, due to an increase in LNG sales volumes purchased from our joint ventures OAO Yamal LNG and OOO Cryogas-Vysotsk. As at 30 June 2019, we recorded 1.4 bcm of natural gas in inventory balances compared to 1.3 bcm at 30 June 2018 relating mainly to natural gas in the Underground Gas Storage Facilities. Natural gas inventory balances depend on the Group's demand for natural gas withdrawals for the sale in the subsequent periods.

In the second quarter of 2019, our liquid hydrocarbons sales volumes decreased by 3.3% to 4.1 million tons compared to 4.3 million tons in the prior year corresponding period mainly due to changes in inventory balances. In the first half of 2019, our liquid hydrocarbons sales volumes increased marginally by 0.7% as compared to the first half of 2018. As at 30 June 2019, we recorded 852 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 806 mt at 30 June 2018. Our liquid hydrocarbon inventory balances tend to fluctuate period-on-period and are usually realized in the following reporting period.

Selected Items of Consolidated Statement of Financial Position

(in millions of Russian roubles)

	30 June 2019	31 December 2018
ASSETS
Non-current assets	1,229,888	923,050
Property, plant and equipment	455,605	408,201
Investments in joint ventures	451,844	244,500
Long-term loans and receivables	256,555	232,922
Current assets	381,807	293,320
Total assets	1,611,695	1,216,370
LIABILITIES AND EQUITY
Non-current liabilities	219,905	222,752
Long-term debt	144,777	170,043
Current liabilities	109,675	107,023
Total liabilities	329,580	329,775
Equity attributable to PAO NOVATEK shareholders	1,264,340	868,254
Non-controlling interest	17,775	18,341
Total equity	1,282,115	886,595
Total liabilities and equity	1,611,695	1,216,370

The full set of consolidated interim condensed IFRS financial statements, the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations are available on the Company's web site (www.novatek.ru).

***

For further information, please visit www.novatek.ru or contact:

Press Service +7 (495) 721 2207 press@novatek.ru	Investor Relations +7 (495) 730 6013 IR@novatek.ru

***

PAO NOVATEK is the largest independent natural gas producer in Russia, and in 2017, entered the global gas market by successfully launching the Yamal LNG project. Founded in 1994, the Company is engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons. The Company's upstream activities are concentrated mainly in the prolific Yamal-Nenets Autonomous Region, which is the world's largest natural gas producing area and accounts for approximately 80% of Russia's natural gas production and approximately 15% of the world's gas production. NOVATEK is a public joint stock company established under the laws of the Russian Federation. The Company's shares are listed in Russia on Moscow Exchange (MOEX) and the London Stock Exchange (LSE) under the ticker symbol «NVTK».

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