Gazprom Neft Sees 2020 Bump in Gas Supply
Russia's Gazprom Neft reported a 5.5% growth in gas production in 2020, helping to keep its overall hydrocarbon output stable year on year at 1.94mn barrels of oil equivalent/day in spite of Opec+ cuts.
The oil arm of state-owned gas supplier Gazprom lifted 43.08bn m3 of gas in the year, versus 40.85bn m3 in 2019, it said in results published on February 18. Fourth-quarter came to 11.01bn m3, up 2.5% compared with the previous three months.
Gazprom Neft attributed the growth to new wells coming on stream at its Arcticgas and Novoportovskoye fields in Russia's far north, the commissioning of gas processing and utilisation facilities at oilfields belonging to its Gazpromneft-Vostok subsidiary and in the Orenburg region. The launch of a gas processing train at the Vostochno-Messoyakhskoye field in northwest Siberia was also a contributing factor.
Increased gas supply helped offset a 4.3% decline in Gazprom Neft's oil and condensate output to 1.22mn b/d, as Russia and other Opec+ members implemented record cuts to production starting in May last year. The company's fourth-quarter liquids supply was up 1.6% quarter on quarter at 1.19mn b/d, however, as those cuts were eased towards the end of the year.
"Not only have we posted a net profit for this challenging year – we have also maintained production volumes at 2019 levels: the result of effective asset management and higher gas production," Gazprom Neft CEO Alexander Dyukov said in a statement. Despite market volatility, the company has also followed through on its pledge to allocate 50% of IFRS net profit in dividends, he said.
Gazprom Neft earned a rubles 85.1bn ($1.07bn) net profit in the fourth quarter, up from a mere rubles 28bn three months earlier and beating the consensus forecast of analysts by 9%. Its Ebitda came to rubles 139bn, up 8.1% q/q and surpassing predictions by 8%, while revenues improved 2.5% to rubles 550bn. Cash flow from operations soared 51.8% to rubles 207.8bn, and Gazprom Neft's net debt to Ebitda ratio improved to 1.32 at the end of December, from 1.50 three months before.
"We had expected a roughly flat q/q performance at the Ebitda line, and Gazprom Neft managed to do even somewhat better, showing the situation in the Russian oilfield has indeed stabilised," BCS Global Markets wrote in a research note.
Full-year results were unsurprisingly weaker, but Gazprom Neft still turned a net profit of rubles 117.7bn, down 70.6% yr/yr. Ebitda came to rubles 415.5bn, down 41.6%, and revenues totalled rubles 2 trillion, down 19.5%.
"Our 2020 performance confirms that not only did the company respond well to the crisis – we also became more efficient," Dyukov continued. "We will continue implementing the company's long-term strategy in 2021 – a key area of focus here being sustainable development, and will be bringing still more efforts to bear in implementing projects in ESG."
Environmental, social and governance (ESG) ratings are a growing concern to oil and gas producers, as they are taken as a key metric of a company's environmental credentials. Gazprom Neft will find it easier to appease climate-conscious investors and buyers if it follows through on its plan to build up its gas business.
The company currently generates most of its revenue from oil sales, but it is developing projects to commercialise more associated gas at its oilfields in the Arctic, and is preparing to launch its and Russia's first LNG bunkering vessel.