Quarter profit “Rosneft” has fallen in four times

Net profit of “Rosneft” belonging to its shareholders, in the first quarter of 2016 amounted to RUB 14 bn, which is four times less the profit of the company for January—March of last year (56 billion rubles) and is 73.6% less profit for the fourth quarter of 2015 (53 billion rubles), follows from the report of Rosneft prepared in accordance with international financial reporting standards (IFRS).

12 analysts and investment banks polled by Interfax greatly differed in forecasts of net profit of the company: they expected that this indicator will make up 6 billion (Bank of America Merrill Lynch) to 72 billion rubles (BCS). Thus, the actual net profit of “Rosneft” was closer to the lower boundary of this range. However, the company’s shares on the Moscow stock exchange rose by 2.69% (12:20 GMT).

In the message “Rosneft” sharp drop in profits compared to the end of 2015 due to one-off recognition at the end of the year of income from insurance compensation and the effect of the implementation of investments in the amount of 38 billion rubles. Another reason for the fall in net profit — decrease in oil prices (in the first quarter of 2016, the average price of Urals crude fell by 39.1%, from $52.8 to us $32.2 per barrel) and exchange rate differences, which the company lost 62 billion rubles in the form of losses on hedging of currency risks, said Raiffeisenbank analyst Andrei Polishchuk.

Total revenue of “Rosneft” in January—March 2016 amounted to 1,048 trillion rubles, having decreased at an annual rate of 20.7% (the consensus forecast of 1.05 trillion). In dollar terms revenue was $14.5 billion, a 32.6% less than in the first quarter of 2015 ($21.5 billion). Revenue from sales of oil, petroleum products and petrochemical products “Rosneft” have decreased by 28.11% from 978 billion rubles to 703 billion rubles the volume of sales increased slightly from 52.8 million tons to 53.6 million tonnes, a Fall in revenue again associated primarily with the decline in oil prices, said Polishchuk. Rosneft emphasizes that through the use of high-margin distribution channels of oil and oil products, the company managed to partially offset the negative effect of changing market conditions and fulfill obligations to supply to domestic market and long-term contracts.

The company also sees revenue growth from gas sales, which compared to the fourth quarter of 2015 increased 13%.

“Against the backdrop of persisting inflationary pressure and a serious deterioration in the macroeconomic environment, the company strengthened the implementation of strategic initiatives to enhance business performance. In terms of negative macroeconomic changes operating cash flow of the company is maintained at a stable level, ensuring the realization of planned investments and repayment obligations,” — commented on the results of the first quarter the head of “Rosneft” Igor Sechin.

He also noted that the decline in costs of production of hydrocarbons has improved profitability.

“Specific capital and operating costs of production at $4.1 and $2.1 per barrel of oil equivalent in the first quarter of 2016, respectively, “Rosneft” is a leader among Russian and Western competitors, which is 2-8 times higher than achieved by the company values”, — said Sechin.