Naftogaz Earnings Swing Negative on Commercial Losses
Ukraine's state-owned Naftogaz suffered negative core earnings in the first half of 2020, dragged down by its commercial division, according to company results published on September 23.
The gas supplier reported adjusted Ebitda of negative hryvnias 1.8bn ($64mn) for the six-month period, versus a hryvnias 28.8bn profit a year before. Its commercial business suffered a hryvnias 9bn Ebitda loss, marking a reversal from a hryvnias 3.1bn gain a year before. The company said results from the segment were "negatively impacted by lower volumes and prices as well as higher provisions for receivables."
Naftogaz complained in early September it was owed some $3.6bn by gas distribution, district heating and power generation firms for supplies it delivers under public service obligations (PSOs). PSOs limit Naftogaz's ability to simply cut off customers that do not pay.
A further hryvnias 2.3bn loss was sustained at Naftogaz's oil arm Ukrnafta, which in the same period last year achieved a hryvnias 0.8bn profit. The company booked a hryvnias 2.7bn loss relating to other activities, including transit services and a production-sharing agreement it has in Egypt, compared to a hryvnias 1.8bn loss a year before.
Earnings at Naftogaz's main exploration and production segment slumped to hryvnias 10.9bn from 25.1bn, while oil midstream and downstream earnings dropped to hryvnias 0.6bn from 1.5bn. While all its other businesses were affected by low prices and weaker demand, its gas storage business saw a jump in earnings to hryvnias 0.7bn from 0.1bn. Ukraine has seen a steep increase in gas storage utilisation this year, thanks to a glut in supply in Europe and the introduction of more attractive Ukrainian customs and storage terms.
Naftogaz's results for the first half and the corresponding period in 2019 do not include the revenues it used to generate from transiting Russian gas. Those activities were spun off last year to independent gas transmission system operator GTSOU.
Naftogaz produced 7.2bn m3 of gas in the first half and sold 9.4bn m3. Its free cash flow shrunk to hryvnias 6.9bn, from 35.5bn a year earlier and it swung to a hryvnias 11.5bn net loss from a 17.6bn profit in the first half of 2019. Its net debt came to hryvnias 14.4bn at the end of June, which is considerably less than the hryvnias 42.6bn it was saddled with a year before.