Rosneft

Earnings Release • Aug 4, 2017

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RNS Number : 1230N

Rosneft Oil Company

04 August 2017

Financial results for 2Q and 1H 2017

·      EBITDA growth by 2.9% Y/Y to RUB 639 bln

·      Over fivefold growth in net Income Q/Q

·      Sustainably positive free cash flow with a growth potential on the back of the key strategic project development

Consolidated IFRS financial results for 2Q and 1H 2017:

	2Q 2017	1Q 2017	Change, %	1H 2017	1H 2016	Change, %
Financial results	RUB bln (except %)
Revenues and equity share in profits of associates and joint ventures	1,399	1,410	(0.8)%	2,809	2,280	23.2%
EBITDA	306	333	(8.1)%	639	621	2.9%
EBITDA margin	21.2%	22.8%	(1.6) p.	22.0%	26.5%	(4.5) p.
Net income attributable to Rosneft shareholders	68	13	>100%	81	1011	(19.8)%
Net income margin	4.9%	0.9%	4.0 p.	2.9%	4.4%	(1.5) p.
Capital expenditures	215	192	12.0%	407	308	32.1%
Free cash flow (RUB equivalent)	39	89	(56.2)%	128	193	(33.7)%
Upstream operating expenses RUB/boe	185	168	10.1%	1703	160	6.3%
	USD bln2 (except %)
Revenues and  equity share in profits of associates and joint ventures	25.3	24.8	2.0%	50.1	33.7	48.7%
EBITDA	5.3	5.7	(7.0)%	11.0	9.0	22.2%
Net income attributable to Rosneft shareholders	1.2	0.2	>100%	1.4	1.6	(12.5)%
Capital expenditures	3.7	3.3	12.1%	7.0	4.4	59.1%
Free cash flow	0.7	1.4	(50.0)%	2.1	2.8	(25.0)%
Upstream operating expenses USD/boe	3.2	2.9	10.3%	2.93	2.3	26.1%
For reference
Average Urals price,  USD per bbl	48.8	52.3	(6.5)%	50.5	38.0	33.0%
Average Urals price, th. RUB per bbl	2.79	3.07	(9.2)%	2.93	2.67	9.8%

1In the first quarter of 2017 the Company obtained final assessment of fair value of real estate leasing entity with the effect of restatement of RUB 2 billion recognized in accordance with IFRS.

2Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.

3 Excluding the expenses of Bashneft assets acquired in October 2016.

Commenting the results for 2Q 2017 and 1H 2017, Rosneft Chief Executive Officer Igor Sechin said:

"The global hydrocarbon market conditions remain unstable with high crude oil and oil product pricing volatility. In such conditions, the Company keeps focusing on further operating efficiency improvement, including on the maximization of the existing assets synergy on the domestic and international markets.

In 2Q 2017, the average crude oil price declined by 9.2% in RUB terms, having a considerable negative impact on the key financials. On the background of weaker crude oil pricing EBITDA was down by 8.1% Q/Q. At the same time, free cash flow remained positive, emphasizing the Company's performance among the global peers.

It is worth highlighting that the Company's net income attributable to shareholders jumped more than fivefold Q/Q, driving 1H 2017 net income to RUB 81 billion."

Financial performance

Revenues and equity share in profits of associates and joint ventures

In 2Q 2017 revenues amounted to RUB 1,399 bln (USD 25.3 bln), remaining almost unchanged Q/Q. The negative effect from weaker oil pricing was offset by higher crude oil sales volumes (+15.7% Q/Q).

In H1 2017 revenues was at RUB 2,809 bln, rising by 23.2% Y/Y. Revenues in USD terms (50.1 bln) increased by almost 50% Y/Y. The growth was driven by higher sales volumes, stronger crude oil prices (+33%), as well as the changes in a product mix.

EBITDA

In 2Q 2017 EBITDA amounted to RUB 306 bln (USD 5.3 bln). The decline by 8.1% Q/Q was driven mostly by weaker crude oil pricing in RUB terms (-9.2%). The negative oil price dynamic was partially mitigated by a positive synergy effect from the new assets acquisition and the efficient cost control.

EBITDA reached RUB 639 billion (USD 11 bln) in 1H 2017, rising by 2.9% Y/Y, despite higher electricity tariffs and the increased number of workovers. The growth in USD terms was at 22.2% Y/Y.

EBITDA margin amounted to 22.0% Y/Y, or lower by 4.5 p.p. Y/Y. The main pressure on the profitability came mostly from the tax maneuver, negative export duty lag, and also from growing tax burden with higher oil pricing level.

Net income attributable to Rosneft shareholders

Net income attributable to Rosneft shareholders amounted to RUB 68 bln in 2Q 2017, rising more than fivefold Y/Y.

In 1H 2017 net income attributable to Rosneft shareholders amounted to RUB 81 bln.

Capital expenditures

Capital expenditures increased to RUB 215 bln (USD 3.7 bln) in 2Q 2017, rising by 12.0% Q/Q. In 1H 2017 capital expenditures was at RUB 407 bln, increasing

by 32.1% Y/Y on the back of the key upstream projects development - Suzun, Tagul, Rospan, Taas-Yuryah and Russkoe, and the acquisition of new strategic assets.

Free cash flow

In 1H 2017 free cash flow remained positive, amounting to RUB 128 bln (USD 2.1 bln). Y/Y decline was mainly driven by the planned growth in capital expenditures.

Net debt / EBITDA

As of the end of 2Q 2017 net debt / EBITDA ratio was at 1.72 in USD terms. As of 1H 2017 the Company maintained a comfortable financial leverage and a strong liquidity position.

Rosneft Information Division

Tel.: +7 (495) 411 54 20

Fax: +7 (495) 411 54 21

August 4, 2017

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.

This information is provided by RNS

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