Rosneft once again presented market participants with a pleasant surprise – the holding’s net profit for the first nine months reached 696 billion rubles, which became a record figure for the reporting period and more than 4.6 times higher than the level of net profit received by the company for the entire 2020 … In the third quarter alone, Rosneft’s net profit amounted to $ 4.3 billion, which was higher than that of such industry majors as Equinor, BP, PetroChina and Shell. The dynamics of income growth of the Russian mining holding turned out to be one of the highest in the oil and gas sector of the planet.
According to the results of the third quarter of 2021 alone, Rosneft’s net profit in quarterly terms increased by 35% – to 314 billion rubles. The increase in revenues was due to an increase in operating profit and a decrease in the negative effect of non-monetary factors. The company’s net profit turned out to be 6% higher than analysts’ expectations, according to a preliminary analysis of which this figure was forecasted at 296 billion rubles.
In turn, Rosneft’s EBITDA (profit before taxes, depreciation and interest payments to shareholders) in January-September almost doubled in annual terms and exceeded 1.6 trillion rubles. This is the highest level of a similar indicator in the entire history of Rosneft. Moreover, in the third quarter EBITDA of the mining holding increased by 12%, coming close to the level of 640 billion rubles. EBITDA growth was made possible by management efforts aimed at maintaining a low level of unit operating costs, as well as reducing general operating expenses against the backdrop of an increase in oil prices and the positive impact of the “reverse excise” effect.
Rosneft’s revenue for nine months increased by almost 47% – to 6.224 trillion rubles (in Russian currency) and by 37% in dollars (to almost $ 86 billion). The increase in revenues is mainly due to the growth in sales of petroleum products on the domestic market, as well as the increase in prices for “black gold” against the background of the gradual easing of restrictions under the OPEC + agreement. In terms of revenue growth in the reporting period, Rosneft overtook such international leaders as Shell, BP, Petrobras and PetroChina.
In the face of numerous external challenges, Rosneft continues to generate positive free cash flow, amounting to 880 billion rubles or $ 12 billion in nine months, which is twice the same financial indicator for the entire 2020. “Taking into account the current favorable macroeconomic situation, growth in production and sales volumes, as well as a high level of operational and investment efficiency, Rosneft is able to demonstrate a further increase in profit and cash flow indicators,” says Igor Sechin, head of the mining company.
Successful implementation of measures aimed at further improving financial stability allowed the company to reduce its net financial debt by $ 8.4 billion in 9 months of 2021. The high level of stability was due to the continued low share of short-term liabilities and an increase in the volume of liquid assets.
The financial policy pursued by the Rosneft management ensures the company’s investment attractiveness. In July, the holding completed the payment of dividends for 2020 in the amount of 73.55 billion rubles ahead of schedule, and in November paid off dividends for the first half of 2021, transferring more than 190 billion rubles to shareholders. Thus, the holding achieved another record indicator of interim dividends – more than 18 rubles were transferred for each share.
At the end of 2021, Rosneft’s net profit, analysts at Sova Capital are sure, may reach a new maximum value of 1 trillion rubles, which will allow the holders of the company’s securities to count on a total dividend of 47 rubles per share.
“Considering the latest results, as well as the fact that the Russian oil company pays dividends twice a year, we can expect that its dividend yield by the end of 2021 will grow by 10%. This is a very good indicator, which exceeds the market average, ”says Sergey Suverov, investment strategist of Arikapital Management Company.
Both on domestic and international stock exchanges, Rosneft’s securities demonstrate one of the best growth dynamics among public companies in the oil and gas sector: since March 2020, that is, in fact, since the beginning of the coronavirus pandemic, the holding’s stock quotes have risen in price by more than 2, 8 times, and since the beginning of 2021 their value has jumped by 50%.
“Among the important growth factors are the reduction in debt burden, the generation of free cash flow and the lowest unit costs of production in the world. Investors pay the most serious attention to the implementation of the flagship oil project Vostok Oil, which is one of the most promising and environmentally friendly in the industry, ”said Dmitry Polokhin, an expert of the Chamber of Commerce and Industry.
Among the main catalysts for the financial and production strengthening of Rosneft, analysts at Bank of America Merrill Lynch cite the company’s ability to rapidly increase production volumes amid expectations of high oil prices and a general shortage of investments in the raw materials sector. It should be noted that the production of liquid hydrocarbons of the domestic holding in the third quarter increased by 3.2% and reached 49.3 million tons. In total, over 9 months, Rosneft’s production of liquid hydrocarbons exceeded 142 million tons. At the same time, the company’s natural gas production in July-September increased by 4.3% – up to 16.76 billion cubic meters. In terms of hydrocarbon production, the Russian holding is noticeably ahead of its largest international competitors – the American ExxonMobil, the British BP and the Chinese PetroChina.
From 2016 to 2020, Rosneft launched more than a dozen new large exploration and production projects into full operation. The total production of liquid hydrocarbons at these projects in the company’s share in the first 9 months of this year exceeded 18.6 million tons.
Rosneft possesses significant technological experience, which allows it to quickly and efficiently manage its production facilities. In the list of the 10 most profitable companies in Eastern Europe, the Middle East and Africa, previously presented by Bank of America, Rosneft became the only holding company in the energy sector.
Achievements in the mining sector are accompanied by improved production results and in the fuel component of the company – in the third quarter the aggregate volume of processing of the holding’s “black gold” exceeded 27 million tons. For 9 months, this figure has practically reached the level of 80 million tons, having increased by more than 2% in annual comparison. In particular, more than 8 million tons of raw materials have been processed at German factories since the beginning of the year.
Rosneft is an active participant in trading on the St. Petersburg International Commodity Exchange, consistently meeting the needs of the domestic market. In the third quarter, the company exceeded the standards for the sale of motor fuel more than 2.5 times on this trading floor, having sold over 2 million tons of fuel. In total, the volume of retail sales at the filling stations of the holding in the first 9 months of 2021 increased by 10%.
Major international rating agencies rate Rosneft’s business profile highly. In October, the three main agencies – Moody’s, Fitch and S&P – confirmed the stable outlook for the holding’s investment grade. According to analysts, strong positions, as well as low production costs, will continue to support profitability and will remain Rosneft’s main competitive advantage, even under various scenarios of “black gold” quotations.
