Rosneft

Earnings Release • Mar 19, 2018

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RNS Number : 0982I

Rosneft Oil Company

19 March 2018

Financial results for 4Q 2017 and 12М 2017

·      2017 revenue growth by 20.6% YoY in RUB terms to RUB 6 trillion

·      2017 EBITDA increase by 9.8% YoY in RUB terms to RUB 1.4 trillion and by 24.4% YoY in USD terms to USD 24 billion

·      2017 net income growth by 27.6% in RUB terms and by 40.7% in USD terms to RUB 222 billion (USD 3.8 billion)

·      Maintaining leadership in hydrocarbons production efficiency - operating expenses  at 3 USD/boe in 2017

·      Sustaining strong cash flow with planned capex growth

Consolidated IFRS financial results for 4Q 2017 and 12M 2017:

	4Q 2017	3Q 2017	Change, %	12M 2017	12M 2016	Change, %
Financial results	RUB bln (except %)
Revenues and equity share in profits of associates and joint ventures	1,709	1,496	14.2%	6,014	4,988	20.6%
EBITDA	393	371	5.9%	1,403	1,278	9.8%
EBITDA margin	22.4%	24.0%	(1.6) p.p.	22.6%	25.0%	(2.4) p.p.
Net income attributable to Rosneft shareholders	100	47	>100%	222	1741	27.6%
Net income margin	5.9%	3.1%	2.8 p.p.	3.7%	3.5%	0.2 p.p.
Capital expenditures	292	223	30.9%	922	709	30.0%
Free cash flow (RUB equivalent)2	44	15	>100%	245	439	(44.2)%
Upstream operating expenses RUB/boe	199	189	5.3%	1773	1633	8.6%
	USD bln4 (except %)
Revenues and  equity share in profits of associates and joint ventures	30.1	26.2	14.9%	106.4	77.2	37.8%
EBITDA	6.7	6.3	6.3%	24.0	19.3	24.4%
Net income attributable to Rosneft shareholders	1.8	0.7	>100%	3.8	2.7	40.7%
Capital expenditures	5.0	3.8	31.6%	15.8	10.7	47.7%
Free cash flow	0.7	0.3	>100%	4.1	6.4	(35.9)%
Upstream operating expenses USD/boe	3.4	3.2	6.3%	3.03	2.53	20.0%
For reference
Average Urals price,  USD per bbl	60.5	50.8	19.0%	53.1	42.1	26.2%
Average Urals price, th. RUB per bbl	3.53	3.00	17.8%	3.10	2.82	9.9%

1The Company recognized final purchase price allocation of Bashneft and Targin assets acquired and liabilities assumed as of the acquisition dates in 2016 accounting report.

2 The calculation includes interest expense on the prepayments on the long-term oil and petroleum products supply agreements.

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

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

Commenting the results for 4Q 2017 and 12M 2017, Rosneft Chairman of the Management Board and Chief Executive Officer Igor Sechin said:

"The Company continued to improve considerably its operating and financial performance, integrating efficiently the acquired assets and improving profitability across the business value chain. With 2017 daily hydrocarbon production growth at 6.5% YoY, revenue increased by 20.6% and EBITDA - by 9.8%.

Entering the new markets in Egypt and in India will substantially accelerate the Company's international business platform development, strengthening Rosneft's leadership position on global commodities markets. Gas production start at the Zohr field and acquiring a stake in Essar Oil has already improved the business financial performance.

At the end of 2017 the Board of Directors approved the new "Rosneft-2022" strategy, focusing on structural quality changes in the Company's business by implementing the progressive management standards, applying new technologies and improving existing assets profitability."

Financial performance

Revenues and equity share in profits of associates and joint ventures

4Q 2017 revenue rose to RUB 1,709 bln (USD 30.1 bln), or up by 14.2% QoQ, driven mainly by higher crude oil price and increased sales volumes of hydrocarbons and petroleum products.

12M 2017 revenue amounted to RUB 6,014 bln, rising by 20.6% YoY (106.4 bln in USD terms, or up by 37.8%) on the back of the new assets integration, positive implications from macro-economic indicators, improving the sales mix and expanding trading activity with significantly faster growth in domestic oil and oil products supplies.

EBITDA

4Q 2017 EBITDA increased by 5.9% QoQ up to RUB 393 bln (USD 6.7 bln) driven by revenue growth despite a tax burden increase and seasonal cost growth.

12M 2017 EBITDA increased by 9.8% YoY in RUB terms to RUB 1,403 bln (USD 24 bln, or up by 24.4% YoY), demonstrating the efficient synergies realization from integrating new assets, a positive contribution from participating in the global joint projects, and in terms of strong operating cost control, all this despite the increasing tax burden.

The Company succeeded in considerable market expansion in Russia, Asia and Europe, material strengthening the position in refining and trading, contributing positively to the financial results in conditions of tax maneuver and export duty lag.

Excluding the new assets acquisition operating expenses remain the lowest among public oil companies at 177 RUB/boe (or 3.0 USD/boe).

Net income attributable to Rosneft shareholders

Net income attributable to Rosneft shareholders reached RUB 100 bln in 4Q 2017, more than doubling QoQ. In 12M 2017 it amounted to RUB 222 bln, exceeding the 2016 level by 27.6%.

Capital expenditures

Capital expenditures were RUB 292 bln (USD 5.0 bln) in 4Q 2017. In 12M 2017 capital expenditures reached RUB 922 bln, rising by 30.0% YoY. The Company raised the investments according to the plan in the most efficient segments. The growth of capital expenditures was mainly driven by the drilling increase at Brownfields (Yuganskneftegaz, Samotlorneftegaz), the new upstream projects development (Vankor, Rospan, Taas-Yuryah and Russkoe field), the acquired Russian upstream assets integration and participation in the international projects.

Free cash flow

Taking into account the investments into certain projects development, 2017 free cash flow amounted to RUB 245 bln (USD 4.1 bln). Despite the growth of business scale and the participation in strategic projects, free cash flow remains positive and represents a major source for meeting all the financial liabilities and the dividend payments to the Company's shareholders.

Dividends payout

In 2017 the Dividend policy was improved. The minimum dividend payout ratio was raised from 35% to 50% of IFRS net income.

In 12M 2017 the dividend payment to the shareholders was RUB 104 bln, including RUB 63.4 bln for 2016 and RUB 40.6 bln for 1H 2017.

Rosneft Information Division

Tel.: +7 (495) 411 54 20

Fax: +7 (495) 411 54 21

March 19, 2018

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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