Rosneft reports record financial results in Q2 2008
Rosneft today reported its consolidated financial results under US GAAP for Q2 and 1H 2008.
In Q2 2008, Rosneft’s EBITDA nearly doubled to a new record high of USD 7,052 mln. from USD 3,581 mln. in Q2 2007, and grew 50% quarter-on-quarter from USD 4,698 mln. in Q1 2008. In 1H 2008, EBITDA totaled USD 11,750 mln., up 121% compared to 1H 2007.
In Q2 2008, net income increased by 153% year-on-year to USD 4,312 mln. from USD 1,703 mln. in Q2 2007, and by 68% quarter-on-quarter from USD 2,564 mln. in Q1 2008. Similarly, in 1H 2008, net income increased by 187% to USD 6,876 mln. from USD 2,393 mln. in 1H 2007.
The strong increase in key financial indicators resulted from continued industry leading growth in daily crude oil production (15.5% in 1H 2008 compared to 1H 2007, including 5.8% organic growth), improved vertical integration following the acquisition of refining and marketing assets in 2007, cost control, and high level of international and domestic prices of oil, petroleum products and gas. Performance improvements were tempered by higher taxes (a total of USD 11.8 bln. in Q2 2008 compared to USD 7.3 bln. in Q1 2007, and USD 20.7 bln. in 1H 2008 compared to USD 12.0 bln. in 1H 2007), transportation tariff growth ranging from 13% to 32%, and real ruble appreciation against the US dollar of 24.7%.
In Q2 2008, Rosneft’s net debt decreased by USD 2,139 mln. to USD 21,436 mln. (including bank deposits of USD 1,291 mln. which will be applied to repayment of the Company’s debt in September). This debt reduction is largely attributable to considerable free cash flow, which amounted to USD 2,337 mln. in Q2 2008. Rosneft’s total debt reduction over 1H 2008 was USD 4,839 mln.
Successful efforts to improve overall efficiency eliminate unnecessary expenditures upon consolidation of recently acquired assets, and increase well productivity resulted in cost reductions in real terms. In Q2 2008, Rosneft’s upstream production and operating expenses increased by only 0.6% in nominal terms to USD 3.31 per barrel from USD 3.29 per barrel in Q2 2007 despite the abovementioned real ruble appreciation of more than 24%. In 1H 2008, upstream production and operating expenses decreased by 0.6% in nominal terms to USD 3.25 per barrel from USD 3.27 in 1H 2007.
The Company’s capital expenditures totaled USD 4,247 mln. in 1H 2008 (including USD 2,498 in Q2 2008), up 86% as compared to 1H 2007. The increase in capital expenditures is primarily attributable to acquisitions in 2007 as well as further expansion of operating activities at Yuganskneftegaz and development of the Vankor field.
In 1H 2008, Rosneft remained the global leader in terms of growth in crude oil production. Rosneft’s daily crude oil output (including production by subsidiaries and share in production by affiliates) increased by 15.5% to 2,121 thousand barrels per day from 1,836 thousand barrels per day in 1H 2007, including a 5.8% organic growth. The organic growth in crude oil output in Q2 2008 amounted to 5.3% as compared to the respective period of 2007.
In 1H 2008, Rosneft’s production of natural and associated gas (including production by subsidiaries and share in production by affiliates) amounted to 6.25 bcm. (including 2.85 bcm. produced in Q2 2008), a decrease of 19.1% compared to 1H 2007. The decline was primarily attributable to the closure of operations at certain gas fields where a significant portion of extracted gas had been flared, which produced only limited impact on gas sales. In 1H 2008, Rosneft’s gas sales amounted to 5.20 bcm. (in Q2 2008 — 2.36 bcm.), a decrease of 6.0% compared to the same period of 2007. In 1H 2008, the average price of gas sold by Rosneft grew 47% compared to 1H 2007.