Financial results for 4Q 2020 and 12M 2020
- Net income in 4Q 2020 reached a record of RUB 324 bln and amounted to RUB 147 bln in 2020.
- EBITDA was RUB 364 bln in 4Q 2020 and RUB 1,209 bln in 2020.
- Positive FCF amounted to RUB 425 bln in 2020 - despite falling crude oil prices and production limitations.
- The Company’s FCF remained positive for 9 consecutive years.
- Global leader in production efficiency: unit upstream operating costs fell in 4Q 2020 to 2.6 USD/boe.
- Reduction of net financial debt by USD 9.9 bln in 4Q 2020.
Consolidated IFRS financial results for 4Q 2020 and for 2020:
| 4Q 2020 | 3Q 2020 | Change, % | 12M 2020 | 12M 2019 | Change, % | ||
|---|---|---|---|---|---|---|---|
| RUB bln (except %) | |||||||
| Revenues and equity share in profits of associates and joint ventures | 1,521 | 1,439 | 5.7% | 5,757 | 8,676 | (33.6)% | |
| EBITDA | 364 | 366 | (0.5)% | 1,209 | 2,105 | (42.6)% | |
| EBITDA margin | 23.2% | 24.7% | (1.5) p.p. | 20.4% | 24.0% | (3.6) p.p. | |
| Net income/(loss) attributable to Rosneft shareholders | 324 | (64) | >100% | 147 | 7051 | (79.1)% | |
| Net income margin | 21.3% | (4.4)% | 25.7 p.p. | 2.6% | 8.1% | (5.5) p.p. | |
| Capital expenditures | 216 | 202 | 6.9% | 785 | 854 | (8.1)% | |
| Free cash flow (RUB equivalent)2 | 73 | 146 | (50.0)% | 425 | 941 | (54.8)% | |
| Upstream operating expenses RUB/boe | 197 | 205 | (3.9)% | 200 | 199 | 0.5% | |
| USD bln3 (except %) | |||||||
| Revenues and equity share in profits of associates and joint ventures | 20.6 | 20.1 | 2.5% | 83.1 | 135.8 | (38.8)% | |
| EBITDA | 4.8 | 5.0 | (4.0)% | 17.2 | 32.5 | (47.1)% | |
| Net income attributable to Rosneft shareholders | 4.3 | (0.8) | >100% | 2.2 | 10.9 | (79.8)% | |
| Capital expenditures | 2.8 | 2.7 | 3.7% | 10.8 | 13.2 | (18.2)% | |
| Free cash flow | 0.8 | 2.0 | (60.0)% | 6.2 | 14.5 | (57.2)% | |
| Upstream operating expenses USD/boe | 2.6 | 2.8 | (7.1)% | 2.8 | 3.1 | (9.7)% | |
| For reference | |||||||
| Average Urals price. USD per bbl | 44.5 | 43.0 | 3.5% | 41.7 | 63.4 | (34.2)% | |
| Average Urals price. th. RUB per bbl | 3.39 | 3.17 | 7.2% | 3.01 | 4.11 | (26.7)% | |
1Net income is restated for the effect of finalized purchase price allocation of 2019 acquisitions.
2The calculation includes interest expense on the prepayments on the long-term oil and petroleum products supply agreements. Previous periods have been adjusted for comparability for net change of subsidiary banks operations in operating activity.
3Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.
Commenting on financial results of 2020 Rosneft’s Chairman of the Management Board and Chief Executive Officer Igor Sechin said:
“Today we release operating and financial results for 2020, a year which proved to be very difficult for the global oil and gas industry. The pandemic of new coronavirus infection led to an unprecedented drop in crude oil demand. The volatility of oil prices was at a critical level. At the same time, Rosneft fulfilled its obligations to balance market demand and supply as requested by the Russian Government.
Today we can proudly state that we were not only able to successfully meet the challenges of 2020, but also demonstrated the ability to work in challenging conditions of unprecedented low prices. This was made possible by the high level of operational and investment efficiency. In the fourth quarter, the unit upstream operating cost decreased to 2.6 USD/boe. On this metric the Company remains a long-term leader in the global oil and gas industry.
In 2020 we reshaped and upgraded our upstream portfolio. We divested certain “tail” assets which are depleted with high water cut and as consequently low-margin and less attractive from a capital return point of view, and/or assets where depletion subsidies have been cancelled. At the same time we refocused on large projects which are low cost, high-margin, with high-quality resources and a low carbon footprint. A key step in this transformation at the end of 2020 was the formation of the “Vostok Oil” shareholding structure with the entry of one of the largest global trading companies allowing for the practical start of the execution of the project activities. This set of transactions will reshape the Company, making it adequate to the external challenges.
«Vostok Oil» is undoubtedly the world's largest new hydrocarbon project. In the coming years, the necessary infrastructure will be created for the organization of production and supply in 2024. The output will reach 100 million tonnes early next decade. «Vostok Oil», being an important milestone in the development of the Company, will become a new oil and gas province in the north of Russia, and will give an impetus to the development of the Northern Sea Route and will be a key drivers of the Russian economic growth for the coming decades.
«Vostok Oil» and other investment projects of the Company will enable the growth of the shareholder value and dividend yield for our shareholders. Despite the difficulties in 2020 the Company generated Net profit which sets a base for the dividends in accordance with the dividend policy”.
Financial performance
Revenues and equity share in profits of associates and joint ventures
4Q 2020 revenues and equity share in profits of associates and joint ventures amounted to RUB 1,521 bln (USD 20.6 bln). The increase in revenues quarter-on-quarter was a result of an increase in volumes of crude oil exported, as well as higher crude oil prices.
In 2020 revenues fell by 33.6% to RUB 5,757 bln compared to 2019 mainly due to a reduction in international crude oil prices and a decrease in crude oil production and sales associated with limitations under the new OPEC+ Agreement, as well as a reduction of global demand due to the COVID-19 pandemic.
EBITDA
4Q 2020 EBITDA amounted to RUB 364 bln (USD 4.8 bln). The decrease in EBITDA was driven by higher seasonal operating expenses which were partially compensated by a positive lag effect of export duties.
The decrease in EBITDA in annual terms, in addition to a decrease in revenue, was caused by an increase in the tax burden, mainly by the negative impact of damping component of the reverse excise duty, which was partially offset by a decrease in general and administrative expenses by 9.3%.
4Q 2020 unit upstream operating costs decreased to a record low of 2.6 USD/boe (197 RUB/boe) due to the implementation of the cost optimization program, including a reduction in oil production at high-water fields, as well as the volume of well maintenance and repair costs.
As a result of the management's efforts to constantly monitor costs and implement activities aimed at efficiency enhancement, the unit upstream operating costs reduced to 2.8 USD/boe (200 RUB/boe) in 2020 despite the decisions taken by the Russian Federation to limit production.
Net income/(loss) attributable to Rosneft shareholders
In 4Q 2020 Net income reached a record high of RUB 324 bln (USD 4.3 bln), driven mainly by a positive effect of «Vostok Oil» project-related acquisition as well as the effect of non-monetary factors.
The positive dynamics in 4Q 2020 contributed to the positive Net income in full-year 2020 of RUB 147 bln (USD 2.2 bln). The reduction in Net income y-o-y was due to the decrease in EBITDA as well as the negative effect of currency exchange rate differences.
Capital expenditures
In 2020 capital expenditures amounted to RUB 785 bln (USD 10.8 bln), a reduction of 8.1% compared to 2019. Unit capital expenditures in the segment of “Exploration and production” were 5.5 USD/boe, a decrease of 9.8% y-o-y. The optimization of capital expenditures is in line with the previously announced plans and is a result of the revision of the Company's investment program within the framework of the Directives on reducing oil production communicated by the authorized state body.
Free cash flow
Despite external challenges, the Company continues to generate positive free cash flow, which amounted to RUB 425 bln (USD 6.2 bln) in 12M 2020. The reduction of free cash flow compared to 2019 was mainly a result of the EBITDA decline, which was partially offset by the reduced capital expenditures.
The Company’ s free cash flow remained positive for 9 consecutive years.
Financial stability
In 2020 financial debt decreased by USD 9.7 bln. Net debt/EBITDA in USD terms was 2.3x at the end of the reporting period, which is a comfortable level for the Company. In 2020 short-term component of the financial debt continued to decline, and at the end of the year the indicator was 17%. Available credit lines and liquid financial assets exceeded the short-term debt by almost three times as of the reporting date.
Rosneft Information Division
February 12, 2021
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.