Rosneft Swings to Q3 Loss
Russia's Rosneft swung to a rubles 64bn ($826mn) net loss in the third quarter, from a rubles 225bn profit a year earlier and a rubles 43bn profit in the second quarter, the company reported on November 13. But its core earnings (Ebitda) held up better, totalling rubles 366bn in Q3 2020, down from rubles 544bn in Q3 2019 but up from rubles 170bn in Q2 2020.
Revenues tallied at rubles 1.44 trillion in the three-month period, versus rubles 2.24 trillion in Q3 2019 and rubles 1.04 trillion in Q2 2020. The main factors were the collapse in oil and gas prices earlier this year and their subsequent recovery, as well as Opec+ production cuts, which came into force in May. Overall hydrocarbon output was down 9.5% in the first nine months of the year at 5.232mn barrels of oil equivalent/day. Liquids output dropped 10% to 155.mn metric tons, and Rosneft had to buy some oil from third parties to meet its supply obligations.
Gas extraction also slumped 6% to 46.75bn m3, with Rosneft blaming this on the loss of some associated gas supply because of Opec+ quotas. Rosneft had once set a goal of ramping up gas production to 100bn m3/year by 2020, aiming to replace Novatek as Russia's second-biggest producer after Gazprom. But while Novatek's gas projects have flourished, Rosneft's have failed to take off. It has been unable to join Gazprom and Novatek on the global LNG market and the several large gas fields it wants to develop in Western Siberia have made slow progress.
Rosneft CEO Igor Sechin pointed to a reduction in upstream costs to $2.8/barrel of oil equivalent, from $3.2/boe a year earlier, as a key achievement, although this was the result of ruble devaluation. In ruble terms, upstream costs were virtually unchanged at rubles 205bn. The company earned some rubles 352bn in free cash flow in the first nine months of the year, ensuring it can fully deliver on its 2019 dividend promises and continue debt reduction, Sechin said.