NOVATEK

Earnings Release • Feb 16, 2022

National Storage Mechanism | Additional information

RNS Number : 8686B

PAO Novatek

16 February 2022

FOR IMMEDIATE RELEASE

NOVATEK Announces Consolidated IFRS Results

for the Year Ended 31 December 2021

Moscow, 16 February 2022. PAO NOVATEK today released its audited consolidated financial statements for the year ended 31 December 2021 prepared in accordance with International Financial Reporting Standards ("IFRS"). 

IFRS Financial Highlights

(in millions of Russian roubles except as stated)

	FY 2021	FY 2020
Oil and gas sales	1,135,206	699,750
Other revenues	21,518	12,062
Total revenues	1,156,724	711,812
Operating expenses	(875,159)	(552,062)
Net gain on disposal of interests in subsidiaries	662	69
Other operating income (loss)	(3,181)	(46,807)
Normalized profit from operations*	278,384	160,766
Normalized EBITDA of subsidiaries*	339,491	201,947
Normalized EBITDA including share in EBITDA of joint ventures*	748,337	392,008
Finance income (expense)	(10,119)	160,565
Share of profit (loss) of joint ventures, net of income tax	232,277	(143,981)
Profit before income tax	501,204	129,596
Profit attributable to shareholders of PAO NOVATEK	432,927	67,832
Normalized profit attributable to shareholders of PAO NOVATEK*, excluding the effect of foreign exchange gains (losses)	421,304	169,020
Normalized basic and diluted earnings per share*, excluding the effect of foreign exchange gains (losses) (in Russian roubles)	140.36	56.26
Cash used for capital expenditures	191,251	204,577

* Excluding the effects from disposal of interests in subsidiaries and joint ventures (recognition of a net gain on disposal and subsequent non-cash revaluation of contingent consideration).

COVID-19 and Macro-Economic Environment

In 2021, global economic activities demonstrated signs of a gradual improvement from the negative influence of the COVID-19 virus. Various countries, however, continue to report rising infection rates with the emergence of new virus strains and differing degrees of vaccination penetration. From time to time, these factors have led to stricter lockdown measures in some countries and continued uncertainties on the pace of global economic recovery.

Under these factors, the OPEC+ participants maintained restricted crude oil production targets in 2021 that, together with cold snaps in Europe, Asia, and North America in the beginning of the year, has led to significant increases in benchmark hydrocarbons prices. Starting from May 2021, OPEC+ began to gradually lift the restrictions on crude oil production targets due to the increased mobility of population, signs of renewed economic activities and the recovery of crude oil demand in major consumer countries. Nevertheless, the crude oil supply still lagged behind global demand due to faster than expected economic recovery. In addition, actual crude oil production by the OPEC+ was not consistent with the increased production plans due to accidents and repair works on oil facilities in a number of countries, which has led to a growth in a deficit in crude oil and an increase in benchmark prices in the second half of 2021. As a result, during 2021, benchmark crude oil prices returned to the pre-pandemic levels of 2019 and continued further growth, which positively affected our sales prices in the reporting period.

The European and Asian natural gas markets were impacted by faster than expected recovery of demand after it was hit by the COVID-19 pandemic, declared energy transition policy, as well as weather factors (cold winter and hot summer, low wind speeds in Europe and droughts in South America) and supply disruptions. All this caused storage level reduction in key consuming regions and a strong price rally in the second half of 2021.

Further developments surrounding the COVID-19 virus spread remain uncertain and are outside of the Group's management control, and the scale and duration of these developments are difficult to assess. Despite these uncertainties, the Group continues to demonstrate strong operating results and implement its investment projects in accordance with the Group's approved Corporate strategy. The Group's management continues to assess the current situation and present macro-economic environment and takes appropriate actions if deemed necessary.

Revenues and EBITDA

In 2021, our total revenues and Normalized EBITDA, including our share in the EBITDA of joint ventures, amounted to RR 1,156.7 billion and RR 748.3 billion, representing increases of 62.5% and 90.9%, respectively, as compared to 2020.

The increases in total revenues and Normalized EBITDA were largely due to an increase in global commodity prices for hydrocarbons, as well as the launch of gas condensate deposits within the fields of the North-Russkiy cluster (the North-Russkoye and East-Tazovskoye fields in the third quarter 2020, as well as the Kharbeyskoye field in the fourth quarter 2021).

Profit attributable to shareholders of PAO NOVATEK

In 2021, our profit attributable to shareholders of PAO NOVATEK increased to RR 432.9 billion (RR 144.23 per share) as compared to RR 67.8 billion in 2020.

Normalized profit attributable to shareholders of PAO NOVATEK (excluding the effects from foreign exchange differences and the disposal of interests in subsidiaries and joint ventures) amounted to RR 421.3 billion (RR 140.36 per share), representing an increase of 149.3% as compared to 2020.

The main factors positively impacting the Group's Normalized profit in 2021 were improved macroeconomic conditions, which resulted in an increase in our hydrocarbons sales prices, as well as the launch of new production facilities in the third quarter 2020 and in the fourth quarter 2021.

Cash used for capital expenditures

Our cash used for capital expenditures amounted to RR 191.3 billion as compared to RR 204.6 billion in 2020. A significant portion of our capital expenditures was attributable to the development of the infrastructure for our LNG projects, the ongoing development and the launch of the fields within the North-Russkiy cluster (the North-Russkoye, East-Tazovskoye, Dorogovskoye and Kharbeyskoye fields), construction of a hydrocracker unit at our Ust-Luga Complex, the development of the Yevo-Yakhinskiy, Ust-Yamsoveyskiy, Verhnetiuteyskiy and West-Seyakhinskiy license areas and exploratory drilling.

Hydrocarbon Production

	FY 2021	FY 2020
Total hydrocarbon production (million boe)	626.3	608.2
Total production (million boe per day)	1.72	1.66
Natural gas production including proportionate share in the production of joint ventures (mmcm)	79,894	77,367
Natural gas production by subsidiaries	42,892	40,647
Group's proportionate share in the natural gas production of joint ventures	37,002	36,720
Liquids production including proportionate share in the production of joint ventures (mt)	12,299	12,237
Liquids production by subsidiaries	6,636	6,433
Group's proportionate share in the liquids production of joint ventures	5,663	5,804

Our total natural gas and liquids production including our proportionate share in the production of joint ventures increased by 3.3% and 0.5%, respectively, mainly due to the commissioning of gas condensate deposits within the fields of the North-Russkiy cluster (the North-Russkoye and East-Tazovskoye fields in the third quarter 2020, as well as the Kharbeyskoye field in the fourth quarter 2021). An increase in the production at these fields completely offset declines in production at mature fields of our subsidiaries and joint ventures.

Hydrocarbon Sales Volumes

	FY 2021	FY 2020
Natural gas (mmcm)	75,817	75,620
including:
Sales in the Russian Federation	67,868	66,692
Sales on international markets	7,949	8,928
Liquids (mt)	16,555	16,387
including:
Stable gas condensate refined products	6,785	6,773
Crude oil	3,909	4,468
Liquefied petroleum gas	3,506	2,959
Stable gas condensate	2,341	2,169
Other oil products	14	18

Our natural gas sales volumes totaled 75.8 billion cubic meters (bcm), representing a marginal increase of 0.3% as compared to 2020. An increase in natural gas volumes sold on the domestic market completely offset a decline in natural gas volumes sold on the international markets. The increase in natural gas volumes sold on the domestic market resulted from the launch of additional production facilities, as well as higher demand from end-customers due to weather conditions. The decline in natural gas volumes sold on the international markets was due to a decrease in LNG sales volumes purchased primarily from our joint venture OAO Yamal LNG, as a result of an increase in the share of Yamal LNG's direct LNG sales under long-term contracts and the corresponding decrease in LNG spot sales to shareholders, including the Group.

As at 31 December 2021, we recorded 0.9 bcm of natural gas in inventory balances compared to 0.8 bcm at 31 December 2020. Natural gas inventory balances fluctuate period on period and depend on the Group's demand for natural gas withdrawals for the sale in subsequent periods.

Our liquid hydrocarbons sales volumes totaled 16.6 million tons, representing an increase of 1.0% as compared to 2020, mainly due to an increase in gas condensate production volumes. As at 31 December 2021, we recorded 868 thousand tons (mt) of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 801 mt at 31 December 2020. 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)

	31 December 2021	31 December 2020
ASSETS
Non-current assets	1,880,597	1,696,244
Property, plant and equipment	870,541	729,407
Investments in joint ventures	572,184	450,632
Long-term loans and receivables	310,001	391,053
Current assets	577,067	362,934
Total assets	2,457,664	2,059,178
LIABILITIES AND EQUITY
Non-current liabilities	157,412	260,755
Long-term debt	67,014	168,988
Current liabilities	388,783	159,996
Total liabilities	546,195	420,751
Equity attributable to PAO NOVATEK shareholders	1,894,402	1,619,964
Non-controlling interest	17,067	18,463
Total equity	1,911,469	1,638,427
Total liabilities and equity	2,457,664	2,059,178

The full set of audited consolidated IFRS financial statements for the year ended 31 December 2021, 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 LNG 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. Upstream activities of the Company's subsidiaries and joint ventures 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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