• Net income in 2Q 2020 amounted to RUB 43 bln compared to negative Net income of RUB 156 bln in 1Q 2020
• In 1H 2020 Rosneft free cash flow was RUB 206 bln
• Upstream operating expenses of 199 RUB/boe remained unchanged in 1H 2020 against the backdrop of crude oil production limitations
• Reduction of financial debt and trading obligations in 1H 2020 amounted to 5.3% or nearly USD 4.3 bln
• Reduction of interest expenses in 1H 2020 by 21% or by RUB 22 bln compared to 1H 2019
• Available credit lines and liquid financial assets exceeded short-term debt by 28%

Commenting on 2Q 2020 financial results Rosneft’s Chairman of the Management Board and Chief Executive Officer Igor Sechin said:
“The reporting period was characterized by unprecedented macroeconomic conditions including a sharp reduction of prices due to failing demand on the back of COVID-19 pandemic and lower production volumes due to realization of the new OPEC+ Agreement.

Crude oil and gas production as well as refining volumes came under severe pressure in 2Q 2020 which led to the deterioration of financial metrics. Still in 1H 2020 the Company kept low level of operating expenses and demonstrated a material free cash flow. This enabled us even in the very difficult conditions to fulfill obligations to the shareholders and to continue the implementation of our strategic goal – the reduction of financial debt and trading obligations.

As prices for crude oil and refined products had improved, our financial metrics demonstrated a positive dynamics in the course of 2Q 2020. This provides us confidence that the Company’s financial results will stage a recovery in the upcoming periods.”

Financial performance

Revenues and equity share in profits of associates and joint ventures

2Q 2020 revenues and equity share in profits of associates and joint ventures amounted to RUB 1,039 bln (USD 14.9 bln). The reduction in sales in RUB terms compared to 1Q 2020 (-41.1%) was driven by a crude oil price drop (-35.1%) as a result of lower demand in the reporting period due to COVID-19 virus pandemic as well as a reduction in delivery volumes of crude oil in accordance with a new OPEC+ Agreement.

Revenues fell by 33.4% in 1H 2020 compared to 1H 2019 mainly due to a reduction in world crude oil prices (-39.5%) and a decrease of crude oil sales volumes (-10.5%).

EBITDA

2Q 2020 EBITDA amounted to RUB 170 bln (USD 2.5 bln), a reduction by nearly a half in RUB terms compared to 1Q 2020. The decrease was driven by lower crude oil prices (-35.1%), a negative damper effect driven by a reduction of the export net-back price relative to the conditional price of the domestic market of petroleum products (RUB -46 bln), which was offset by a positive impact of the export duty lag due to a sharp drop of crude oil prices in March 2020 (RUB 102 bln).

The decrease in EBITDA compared to 1H 2019 was due to a significant drop of world crude oil prices (-39.5%), reduction in delivery volumes of crude oil and a negative damper effect (RUB -142 bln) which was partially offset by a positive effect from trading activity and decrease in administrative expenses of 7.2%.

1H 2020 unit upstream operating expenses remained unchanged compared to the same period of 2019 in terms of production decline in accordance with the new OPEC+ Agreement.

2Q 2020 unit upstream operating expenses were 208 RUB/boe (2.9 USD/boe), unchanged in USD terms. The increase of 8.9% in RUB terms compared to 1Q 2020 was mainly due to a scheduled seasonal growth of maintenance and repair of pipelines and oilfield equipment.

Net income/(loss) attributable to Rosneft shareholders

In 2Q 2020 Net income attributable to Rosneft shareholders amounted to RUB 43 bln (USD 0.7 bln) against the backdrop of the lower operating income due to the negative external factors.

Taking into account 1Q 2020 results, Net profit in 1H 2020 was RUB -113 bln (USD -1.3 bln). If compared to 1H 2019 the reduction was due to negative price fluctuations because of the impact of COVID-19 and the new OPEC+ Agreement as well as due to the negative effect of forex exchange differences (RUB -66 bln).

Capital expenditures

1H 2020 capital expenditures amounted to RUB 367 bln (USD 5.3 bln), a reduction of 15.8% compared to the same period of 2019. The decrease was mainly driven by optimization of the investment program in light of the negative market conditions and the new OPEC+ Agreement from April 2020 aimed at the reduction of crude oil production.

Free cash flow

1H 2020 free cash flow amounted to RUB 206 bln (USD 3.4 bln). A reduction compared to the same period of 2019 was driven by the EBITDA decrease by nearly a half which was partially offset by the lower capital expenditures.

Financial stability

In 1H 2020 financial debt and trading obligations decreased by USD 4.3 bln or 5.3%. Interest expenses reduced by 21% or by RUB 22 bln, and 25% in USD terms compared to 1H 2019. Net debt/EBITDA was 2.09x in USD terms as at the reporting date. Available credit lines and liquid financial assets exceed short term debt by 28%.

KeyFacts Energy: Rosneft Russia country profile