NOVATEK Announces Consolidated IFRS Results for the Second Quarter and the First Half 2019

Mark Gyetvay, Deputy Chairman of the Management Board
Alexander Nazarov, Head of IR
+7 (495) 730-6013
ir@novatek.ru

 

Maria Dokuchaeva, Press-secretary
+7 (495) 721-2207
press@novatek.ru

 

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24 July 2019

Moscow, 24 July 2019. PAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three and six months ended 30 June 2019 prepared in accordance with International Financial Reporting Standards (“IFRS”). 

IFRS Financial Highlights
(in millions of Russian roubles except as stated)
2Q 2019
2Q 2018
 
1H 2019
1H 2018
215,789 
194,818 
Oil and gas sales
446,973 
373,303 
2,724 
1,004 
Other revenues
5,646 
1,922 
218,513 
195,822 
Total revenues
452,619 
375,225 
(157,507)
(135,606)
Operating expenses
(332,647)
(266,643)
Net gain on disposal of
interests in subsidiaries and joint ventures
308,578 
1,645 
(247)
(621)
Other operating income (loss)
(1,161)
(519)
60,759 
59,595 
Normalized profit from operations*
118,811 
108,063 
69,193 
68,958 
Normalized EBITDA of subsidiaries*
134,917 
125,379 
115,835 
101,339 
Normalized EBITDA including share in EBITDA of joint ventures*
233,777 
177,645 
(277)
7,380 
Finance income (expense)
(6,298)
12,782 
23,282 
(18,215)
Share of profit (loss) of joint ventures,
net of income tax
94,255 
(17,052)
83,764 
48,760 
Profit before income tax
515,346 
105,438 
69,175 
32,041 
Profit attributable to
shareholders of PAO NOVATEK
450,971 
75,162 
64,296 
54,289 
Normalized profit attributable to
shareholders of PAO NOVATEK**
130,026 
101,199 
21.35 
18.01 
Normalized basic and diluted earnings per share** (in Russian roubles)
43.17 
33.57 
31,203 
22,052 
Cash used for capital expenditures
73,679 
31,764 
* Excluding the effect from disposal of interests in subsidiaries and joint ventures.
** Excluding the effects from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange gains (losses)                                                  

 

Revenues and EBITDA

In the second quarter of 2019, our total revenues amounted to RR 218.5 billion and Normalized EBITDA, including our share in EBITDA of joint ventures, totaled RR 115.8 billion, representing increases of 11.6% and 14.3%, respectively, as compared to the corresponding period in 2018. Our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, during the six months ended 30 June 2019 amounted to RR 452.6 billion and RR 233.8 billion, representing increases of 20.6% and 31.6%, respectively, as compared to the prior year reporting period.

The increases in total revenues and Normalized EBITDA were largely due to the production launch at the second and third LNG trains at Yamal LNG in the second half of 2018.

Profit attributable to shareholders of PAO NOVATEK

Profit attributable to shareholders of PAO NOVATEK increased to RR 69.2 billion (RR 22.97 per share), or by 115.9%, in the second quarter of 2019 and to RR 451.0 billion (RR 149.73 per share), or six-fold, in the first half of 2019 as compared to the corresponding periods in 2018. Our profit was significantly impacted by the recognition of a net gain on disposal of a 10% participation interest in Arctic LNG 2 project in March 2019 in the amount of RR 308.6 billion, and the recognition of non-cash foreign exchange effects on foreign currency denominated loans of the Group and its joint ventures in both reporting periods.

Excluding the effect from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange differences, Normalized profit attributable to shareholders of PAO NOVATEK totaled RR 64.3 billion (RR 21.35 per share) in the second quarter of 2019 and RR 130.0 billion (RR 43.17 per share) in the first half of 2019, representing increases of 18.4% and 28.5%, respectively, as compared to the corresponding periods in 2018.

Cash used for capital expenditures

Our cash used for capital expenditures increased to RR 31.2 billion, or by 41.5%, in the second quarter of 2019 and to RR 73.7 billion, or by 132.0%, in the first half of 2019 as compared to the prior year corresponding periods. A significant portion of our capital expenditures related to the development of our LNG projects (Arctic LNG 2 project prior to March 2019 and the LNG construction center located in the Murmansk region), as well as the North-Russkoye field and crude oil deposits of the East-Tarkosalinskoye and the Yarudeyskoye fields.

Hydrocarbon Production and Purchased Volumes
2Q 2019
2Q 2018
 
1H 2019
1H 2018
149.0 
131.8 
Total hydrocarbon production,
million barrels of oil equivalent (million boe)
296.1 
264.3 
1.64 
1.45 
Total production (million boe per day)
1.64 
1.46 
18,910 
16,418 
Natural gas production including proportionate share in the production of joint ventures, million cubic meters (mmcm)
37,570 
32,926 
9,935 
10,562 
Natural gas production by subsidiaries
20,034 
20,925 
7,909 
4,420 
Natural gas purchases from joint ventures
16,830 
12,007 
1,971 
1,708 
Other purchases of natural gas
4,190 
3,437 
19,815 
16,690 
Total natural gas production by subsidiaries and purchases (mmcm)
41,054 
36,369 
3,035 
2,928 
Liquids production including proportionate share in the production of joint ventures,
thousand tons (mt)
6,022 
5,864 
1,607 
1,650 
Liquids production by subsidiaries
3,207 
3,278 
2,366 
2,322 
Liquids purchases from joint ventures
4,679 
4,622 
51 
56 
Other purchases of liquids
107 
100 
4,024 
4,028 
Total liquids production by subsidiaries
and purchases (mt)
7,993 
8,000 

Total natural gas production, including our proportionate share in the production of joint ventures, for the second quarter and the first half of 2019 increased by 15.2% and 14.1%, respectively, and our total liquids production increased by 3.7% and 2.7%, respectively, as compared to the corresponding periods in 2018. The main factor positively impacting the production increase was the launch of LNG production at the second and third LNG trains at Yamal LNG in the second half of 2018.

Hydrocarbon Sales Volumes
2Q 2019
2Q 2018
 
1H 2019
1H 2018
18,764 
15,149 
Natural gas (mmcm)
40,959 
35,412 
 
 
including:
 
 
15,114 
14,496 
Sales in the Russian Federation
33,888 
33,801 
3,650 
653 
Sales on international markets
7,071 
1,611 
4,130 
4,273 
Liquids (mt)
8,106 
8,050 
 
 
including:
 
 
1,841 
2,028 
Stable gas condensate refined products
3,638 
3,594 
1,214 
1,148 
Crude oil
2,341 
2,271 
674 
658 
Liquefied petroleum gas
1,351 
1,307 
396 
436 
Stable gas condensate
768 
872 
Other petroleum products

In the second quarter and the first half of 2019, our natural gas sales volumes totaled 18.8 billion and 41.0 billion cubic meters (bcm), representing increases of 23.9% and 15.7%, respectively, as compared to the corresponding periods in 2018, due to an increase in LNG sales volumes purchased from our joint ventures OAO Yamal LNG and OOO Cryogas-Vysotsk. As at 30 June 2019, we recorded 1.4 bcm of natural gas in inventory balances compared to 1.3 bcm at 30 June 2018 relating mainly to natural gas in the Underground Gas Storage Facilities. Natural gas inventory balances depend on the Group’s demand for natural gas withdrawals for the sale in the subsequent periods.

In the second quarter of 2019, our liquid hydrocarbons sales volumes decreased by 3.3% to 4.1 million tons compared to 4.3 million tons in the prior year corresponding period mainly due to changes in inventory balances. In the first half of 2019, our liquid hydrocarbons sales volumes increased marginally by 0.7% as compared to the first half of 2018. As at 30 June 2019, we recorded 852 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 806 mt at 30 June 2018. Our liquid hydrocarbon inventory balances tend to fluctuate period-on-period and are usually realized in the following reporting period.

Selected Items of Consolidated Statement of Financial Position
(in millions of Russian roubles)
 
30 June 2019
31 December 2018
ASSETS
 
 
Non-current assets
1,229,888
923,050
Property, plant and equipment
455,605
408,201
Investments in joint ventures
451,844
244,500
Long-term loans and receivables
256,555
232,922
Current assets
381,807
293,320
Total assets
1,611,695
1,216,370
LIABILITIES AND EQUITY
 
 
Non-current liabilities
219,905
222,752
Long-term debt
144,777
170,043
Current liabilities
109,675
107,023
Total liabilities
329,580
329,775
Equity attributable to
PAO NOVATEK shareholders
 
1,264,340
868,254
Non-controlling interest
17,775
18,341
Total equity
1,282,115
886,595
Total liabilities and equity
1,611,695
1,216,370

The full set of consolidated interim condensed IFRS financial statements, the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations are available on the Company’s web site (www.novatek.ru). 


PAO NOVATEK is the largest independent natural gas producer in Russia, and in 2017, entered the global gas market by successfully launching the Yamal LNG project. Founded in 1994, the Company is engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons. The Company’s upstream activities are concentrated mainly in the prolific Yamal-Nenets Autonomous Region, which is the world’s largest natural gas producing area and accounts for approximately 80% of Russia’s natural gas production and approximately 15% of the world’s gas production. NOVATEK is a public joint stock company established under the laws of the Russian Federation. The Company’s shares are listed in Russia on Moscow Exchange (MOEX) and the London Stock Exchange (LSE) under the ticker symbol “NVTK”.

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