Rosneft Posts USD 2.1 bln Net Income, Reduces Net Debt by USD 2 bln in Q1 2009

On May 28 Rosneft reported its consolidated financial results under US GAAP for Q1 2009.

In Q1 2009, Rosneft’s revenue decreased by 23.5% quarter-on-quarter to USD 8,264 mln from USD 10,799 mln in Q4 2008 and by 49.5% year-on-year from USD 16,368 mln in Q1 2008. Rosneft’s EBITDA amounted to USD 2,318 mln, an increase of USD 2,286 mln quarter-on-quarter from USD 32 mln in Q4 2008 and a decrease of 50.7% year-on-year from USD 4,698 mln in Q1 2008. Net income increased by 165.8% quarter-on-quarter to USD 2,060 mln from USD 775 mln in Q4 2008 and decreased by 19.7% year-on-year from USD 2,564 mln.

In Q1 2009, Rosneft’s net debt fell to USD 19,239 mln or by USD 2,044 mln due to strong free cash flow generation which amounted to USD 1,134 mln and a decrease in the dollar value of rouble-denominated debt.

The substantial improvement of main financial indicators in Q1 2009 vs. Q4 2008 was primarily due to the normalization of taxes, decrease in controllable costs, stabilization of prices for crude oil and petroleum products and depreciation of the rouble. In Q1 2009 Rosneft’s operating expenses decreased to USD 820 mln compared to USD 1,313 mln in Q4 2008 and USD 1,020 mln in Q1 2008. Upstream operating expenses fell by 37% to USD 2.37 per barrel from USD 3.77 per barrel in Q4 2008 (USD 3.19 per barrel in Q1 2008), refining expenses decreased by 19% quarter-on-quarter (from USD 3.1 per barrel to USD 2.5 per barrel). Negative factors included lower average prices for crude oil and petroleum products, higher inflation rates, growth of monopoly tariffs, and weakening of domestic demand.

In Q1 2009 Rosneft’s daily crude oil output (including production by subsidiaries and share in production by affiliates) decreased by 0.8% to 2,110 th. barrels per day from 2,127 th. barrels per day in Q4 2008 and by 0.7% compared with 2,125 th. barrels per day in Q1 2008. The modest decline was due to abnormally low temperatures in Western Siberia, which hindered well turnarounds. Crude oil production fully recovered by the end of March and reached a historical maximum of 2,136 th. barrels per day in the second half of May.

In Q1 2009, Rosneft produced 11.6 mln tonnes of petroleum products, up 1.2% quarter-on-quarter and down 3% year-on-year following a decline in domestic demand, particularly in January when consumers ran down product stocks in anticipation of price reductions. Domestic product sales decreased to 4.05 mln tonnes in Q1 2009 from 4.39 mln tonnes in Q4 2008 and 4.85 mln tonnes in Q1 2008. Lower domestic sales were balanced by the redirection of product flows to export markets.

Commenting on Q1 2009 results, Rosneft President Sergey Bogdanchikov said: “In the first quarter Rosneft demonstrated outstanding flexibility in managing costs and product flows, which drove net debt reduction of more than USD 2 bln despite a fall in the crude oil price of more than 50% compared to Q1 2008. Throughout 2009 we will continue to focus on cost improvements, net debt reduction, strategic projects, including launch of our Vankor field, and further progress with the government on tax and monopoly tariff reform”.

Rosneft’s US GAAP financial statements and Management’s Discussion and Analysis (MD&A) for Q1 2009 and a related investor presentation are available here.

Rosneft Information Division
Tel.: +7 (495) 221-31-07
Fax: +7 (495) 411-54-21
n_manvelov@rosneft.ru
May 28, 2009

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.