Rosneft sees sevenfold rise in profits
Thursday, May 17, 2018
Russian oil champion Rosneft registered a sevenfold rise in profits in the first quarter of 2018, aided by stronger oil prices.

Outlining its results on May 14, the state-owned company posted a net income of 81 billion rubles (US$1.5 billion) for the three-month period, up from 11 billion rubles (US$180 million) a year earlier. Sales climbed by 22% on the year, arriving at 1.72 trillion rubles (US$30.9 billion), while EBITDA was up 16% at 385 billion rubles (US$6.8 billion).

The company’s free cash flow from January to the end of March totalled 142 billion rubles (US$2.5 billion), representing a growth of 40.6% year on year.

In a statement, Rosneft said its performance had been buoyed by a 25% increase year on year in the average price of Russia’s Urals oil blend to US$65.2 per barrel in the first quarter. Oil prices have been more bullish this year, thanks largely to an agreement between OPEC, Russia and other producers on capping supply. The deal, struck in late 2016, aimed to remove 1.8 million bpd of production from the global market. It is expected to remain in force until the end of 2018.

Brent hit US$78 per barrel last week – its highest level since November 2014 – following US President Donald Trump’s decision to pull out of the Iranian nuclear deal. The benchmark has lost some ground since then, however, amid opposition in Europe to fresh sanctions on Tehran and an increase in US drilling.

Rosneft, which is responsible for over 40% of Russian oil supply, saw its output of liquids fall by 1.2% year on year to 4.57 million bpd in the first quarter, largely owing to its commitments under the global deal on output cuts. But the firm noted it would be able to launch an extra 100,000 bpd of production quite quickly if necessary. Its gas output, which is not subject to restrictions, slumped by 2% year on year to 16.87 bcm.

Rosneft, which has made a series of large-scale acquisitions in Russia and overseas since 2016, no longer discloses its debts. However, analyst at the Moscow-based Aton brokerage estimated that the firm’s net debt – excluding prepayment deals – sat at 3.4 trillion rubles (US$55 billion) at the end of March, 2% less than three months earlier. In a note, they said this suggested a net debt to EBITDA ratio of 2.2. Earlier this month, Rosneft’s management pledged to reduce the company’s debt portfolio by at least 500 billion rubles (US$8.1 billion) by the end of 2018.

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