“Rosneft” has published data on financial and production reporting for the third quarter and for 9 months of 2017. Those reports include data conducted in the intervening period the transactions and the committed expenditure of the oil company. That is typical – on the background of how other energy firms reduced private participation in the assets abroad, “Rosneft” invested almost $ 5 billion in the purchase of a 49 percent stake in Essar Oil Limited Indian and 30 percent of shares in Egyptian deposits of Sohr, which will begin to develop at the end of this year.
For example, in the field of Zohr over 30 per cent of gas reserves in Egypt. Development of the field in which the Italian ENI has a controlling stake (60% stake), for decades to provide the needs of Egypt’s natural gas. The field has finished all transport infrastructure, and the pace of implementation of the project record. In 2015 Eni announced the discovery of, and at the end of 2017 it is planned to start production. For comparison, smaller reserves in the Aphrodite and Leviathan offshore Israel and Cyprus, respectively, which was opened in 2010 and 2011, still not operational. The deal will allow Rosneft to strengthen its positions in a strategically important region and become one of the leading players in the LNG market. According to experts, following the closing of the transaction “Rosneft” will be able to increase the geological reserves of hydrocarbons of approximately 250 billion cubic meters.
As for the Indian asset, it is necessary to tell directly – in terms, perhaps, the most growing in the world the Indian market for it was fierce struggle of the largest world players – Saudi Aramco, the national oil company of Iran and many others. The result was won by Rosneft. Thus, the Russian company with state participation became a part of the fastest growing energy market in the Asia-Pacific region and the world. The growth rate of the Indian economy – more than 7% per year: this is the highest level among all major countries. The demand for oil is growing at about 10% per year, and in the next 10-15 years it is expected a qualitative shift in the level of welfare of the Indians, so that the fleet of the country will grow more than fourfold from the current 43 million units to 187 million in 2030. It is expected that the car fleet in India reaches 10% of the global total. And output of “Rosneft” the Indian market is certainly an important strategic decision. Suffice it to say that the cumulative growth of India’s GDP in 2013-2016 was 29.8%. Essar Oil is a first – class asset with significant development potential. The processing capacity of the refinery, “Vadinar” currently stands at 20 million tons per year. In terms of processing, this refinery is the second in India, and the level of technological complexity among the ten best plants in the world. The refinery is highly flexible in terms of feedstock and is able to process wide range of crude oil from private and commercial assets of Rosneft, including the most severe grade. The configuration of the refinery is one of the most technologically sophisticated in the Asia-Pacific region and has significant opportunities to expand and develop the petrochemical industry. The main sources of synergy is the ability of processing heavy oil from Venezuela and the cross-supply of petroleum products to Asia-Pacific markets. This will significantly increase the economic efficiency of the refinery, which currently exceeds $ 10 per barrel processing. This deal also includes deep-sea export-import port, which allows you to take super-large tankers with a capacity up to 350 thousand tons, directly supply the necessary raw materials and to export oil products. An essential element is the network of 3.5 thousand gas stations in the Indian market, which has a high level of liberalization and efficiency, while informally recognized in the company’s retail network will be significantly expanded. According to experts, the assets of this scale and quality rarely available on the market which makes the deal unique. Long-term investment in refineries in India is a highly profitable investment.
“Vadinar refinery, write analysts at UBS, is a large-scale refinery of high complexity, which should increase the volume of processing of “Rosneft” approximately on 7%. In addition, the deal opens for “Rosneft” the fast growing Indian market and will build its trading business in the region.”
Not remained aloof and “home investment”. At the auction, “Rosneft” has received the right to develop Elginskogo plot, which was the largest in the undistributed Fund of the Russian Federation. The company has good opportunities for synergies in the development of this area – “Rosneft” develops near the giant Priobskoye field, included in one of the largest production assets of the company – “Yuganskneftegaz”. In addition, in April closed the deal to acquire 100 percent stake in the project “Kondaneft” under which is developing kondinskogo, West Elginskogo, Chiprovskogo Angarskogo and new license areas in the Khanty-Mansi Autonomous district.
“The company paid for the inventory “Kondaneft” inexpensive, – said the Director of info-TEK Terminal Rustam Tankan. – They were valued at $ 1. per barrel, despite the fact that she “Rosneft” has attracted investors in their projects on the basis of inventory valuation at $ 3. per barrel, a price at least three times lower. Rosneft was able to take advantage of favorable market conditions by purchasing a very promising asset at a good price. It is also important that we bought licenses for the stations, and the group of fields that are almost ready for commercial production”.
Kondaneft and Urginsky area will become an integral part of one of the most promising mining clusters in the Russian oil and gas industry, including due to the synergistic effect in the coming years will be priced much higher purchase price.
Extremely profitable foreign and Russian assets were acquired at the bottom of the market, and Rosneft has already started to receive substantial returns on relevant investments. Over time, the current activity of Rosneft in the field of mergers and acquisitions, no doubt, will lead to significant growth of capitalization.
The company maintains a comfortable level of debt load. In the first 9 months of 2017, Rosneft has provided a scheduled repayment of all debt. Even after complete breakthrough of transactions in 2017, the ratio of net debt to EBITDA of Rosneft is about 2.0, which is quite comfortable level for the company.
The dynamics of debt reflects the movement of funds in connection with the acquisition of promising new assets and growth capital expenditures. Rosneft increased its capital investment in the development of its own production and refining, creating the basis for growth of cash flow. For the first 9 months of 2017 capex of the company increased by 54% in dollar terms. As a result, Rosneft became the leader on the dynamics of capex (compared to capex, Chevron has decreased by 30.9%, Statoil – by 12.1%, ExxonMobil – 11.2%, Shell – 8.6%). The Russian Corporation remains the most efficient company of the sector-specific expenditures. “The planned increase in capex, – it is told in the reporting “Rosneft” – was “associated with the program of capital construction in key mining projects of the company – Tagul, Rospan, TAAS-Yuryakh and Russian.”
Now on the financial indicators. For 9 months significantly increased the revenue of “Rosneft” – by 43.7% in us dollar terms and by 22.9% in virtually any. Revenue growth for 9 months is significantly higher than that of competitors (Total – 15.5%, and Statoil to 33.8%). EBITDA for the 9 months. 2017 over 1 trillion virtually any., an increase of 10.6% year-on-year. In the third quarter of 2017 EBITDA increased by 21.2% to 371 billion virtually any In EBITDA results of the Company for the 3rd quarter by 15 % exceeded the consensus forecasts of 13 key investment banks. At the same time, Rosneft 22 consecutive quarters “generates positive free cash flow”, as stated in its accounting documents – the strategy of the company is in the direction of available funds to projects with a high rate of return. Net profit attributable to shareholders of the Company” following the results of III quarter of 2017 increased 1.8% to 47 billion virtually any.
In General, there is every reason to believe that 2017 will be “Rosneft” as a breakthrough in terms of the development of Russian assets, and from the perspective of international investment.