NOVATEK Announces Consolidated IFRS Results for the Third Quarter and the Nine Months 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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30 October 2019

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

IFRS Financial Highlights
(in millions of Russian roubles except as stated)
3Q19
3Q18
 
9M19
9M18
187,258 
217,934 
Oil and gas sales
634,231 
591,237 
1,904 
1,432 
Other revenues
7,550 
3,354 
189,162 
219,366 
Total revenues
641,781 
594,591 
(140,604)
(156,903)
Operating expenses
(473,251)
(423,546)
366,390 
Net gain on disposal of
interests in subsidiaries and joint ventures
674,968 
1,645 
173 
(485)
Other operating income (loss)
(988)
(1,004)
48,731 
61,978 
Normalized profit from operations*
167,542 
170,041 
56,415 
70,744 
Normalized EBITDA of subsidiaries*
191,332 
196,123 
104,519 
118,091 
Normalized EBITDA including share in EBITDA of joint ventures*
338,296 
295,736 
5,740 
14,560 
Finance income (expense)
(558)
27,342 
18,714 
(11,942)
Share of profit (loss) of joint ventures,
net of income tax
112,969 
(28,994)
439,575 
64,596 
Profit before income tax
954,921 
170,034 
369,959 
45,900 
Profit attributable to
shareholders of PAO NOVATEK
820,930 
121,062 
48,539 
65,522 
Normalized profit attributable to
shareholders of PAO NOVATEK**
178,566 
166,721 
16.12 
21.75 
Normalized basic and diluted earnings per share** (in Russian roubles)
59.29 
55.31 
36,519 
24,783 
Cash used for capital expenditures
110,198 
56,547 
* 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 third quarter of 2019, our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, amounted to RR 189.2 billion and RR 104.5 billion, respectively, representing decreases of 13.8% and 11.5% as compared to the prior year corresponding period. The decreases were primarily due to lower hydrocarbons sales prices on international markets in 2019, which were largely offset by an increase in our natural gas sales volumes due to the production launch at the second and third LNG trains at Yamal LNG in July and November 2018, respectively.

In the nine months ended 30 September 2019, our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, increased to RR 641.8 billion and RR 338.3 billion, respectively, or by 7.9% and 14.4%, as compared to the corresponding period in 2018. This was largely due to an increase in LNG sales volumes and our domestic average natural gas sales price, which was offset by a decrease in hydrocarbons sales prices on international markets in 2019.

Profit attributable to shareholders of PAO NOVATEK

Profit attributable to shareholders of PAO NOVATEK increased to RR 370.0 billion (RR 122.86 per share), or eight-fold, in the third quarter of 2019 and to RR 820.9 billion (RR 272.59 per share), or nearly seven-fold, in the nine months 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% and a 30% participation interests in Arctic LNG 2 project in March and July 2019, respectively, taken together amounting to RR 675.0 billion. In addition, our profit was impacted by 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 totalled RR 48.5 billion (RR 16.12 per share) in the third quarter of 2019 and RR 178.6 billion (RR 59.29 per share) in the nine months of 2019. This represented a decrease of 25.9% and an increase of 7.1%, respectively, as compared to the corresponding periods in 2018.

Cash used for capital expenditures

Our cash used for capital expenditures increased to RR 36.5 billion, or by 47.4%, in the third quarter of 2019 and to RR 110.2 billion, or by 94.9%, in the nine months 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), the North-Russkoye field, the Beregovoye field, crude oil deposits of the East-Tarkosalinskoye and the Yarudeyskoye fields, and exploratory drilling.

Hydrocarbon Production and Purchased Volumes
3Q19
3Q18
 
9M19
9M18
145.2 
138.0 
Total hydrocarbon production,
million barrels of oil equivalent (million boe)
441.3 
402.2 
1.58 
1.50 
Total production (million boe per day)
1.62 
1.47 
18,313 
17,386 
Natural gas production including proportionate share in the production of joint ventures, million cubic meters (mmcm)
55,883 
50,312 
9,679 
10,524 
Natural gas production by subsidiaries
29,713 
31,449 
5,668 
4,133 
Natural gas purchases from joint ventures
22,498 
16,140 
2,137 
2,439 
Other purchases of natural gas
6,327 
5,876 
17,484 
17,096 
Total natural gas production by subsidiaries and purchases (mmcm)
58,538 
53,465 
3,041 
2,911 
Liquids production including proportionate share in the production of joint ventures,
thousand tons (mt)
9,063 
8,775 
1,632 
1,631 
Liquids production by subsidiaries
4,839 
4,909 
2,434 
2,333 
Liquids purchases from joint ventures
7,113 
6,955 
70 
65 
Other purchases of liquids
177 
165 
4,136 
4,029 
Total liquids production by subsidiaries
and purchases (mt)
12,129 
12,029 

 Total natural gas production, including our proportionate share in the production of joint ventures, for the third quarter and the nine months of 2019 increased by 5.3% and 11.1%, respectively, and our total liquids production increased by 4.5% and 3.3%, respectively, as compared to the corresponding periods in 2018. The main factors positively affecting the production increase were the launch of LNG production at the second and third LNG trains at Yamal LNG in July and November 2018, respectively, and the commencement of crude oil commercial production at the Yaro-Yakhinskoye field of our joint venture Arcticgas in December 2018.

Hydrocarbon Sales Volumes
3Q19
3Q18
 
9M19
9M18
16,700 
15,589 
Natural gas (mmcm)
57,659 
51,001 
 
 
including:
 
 
13,660 
13,766 
Sales in the Russian Federation
47,548 
47,567 
3,040 
1,823 
Sales on international markets
10,111 
3,434 
4,000 
3,934 
Liquids (mt)
12,106 
11,984 
 
 
including:
 
 
1,551 
1,552 
Stable gas condensate refined products
5,189 
5,146 
1,265 
1,134 
Crude oil
3,606 
3,405 
684 
679 
Liquefied petroleum gas
2,035 
1,986 
489 
566 
Stable gas condensate
1,257 
1,438 
11 
Other petroleum products
19 

In the third quarter and the nine months of 2019, our natural gas sales volumes totaled 16.7 billion and 57.7 billion cubic meters (bcm), representing increases of 7.1% and 13.1%, respectively, as compared to the corresponding periods in 2018, due to an increase in LNG sales volumes purchased mainly from our joint ventures OAO Yamal LNG and OOO Cryogas-Vysotsk. As at 30 September 2019, we recorded 1.8 bcm of natural gas in inventory balances compared to 2.4 bcm at 30 September 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 third quarter and the nine months of 2019, our liquid hydrocarbons sales volumes totaled 4.0 million and 12.1 million tons, representing increases of 1.7% and 1.0%, respectively, as compared to the corresponding periods in 2018. The increases were mainly due to crude oil purchases from our joint venture Arcticgas resulting from the commencement of crude oil production at the Yaro-Yakhinskoye field in December 2018. As at 30 September 2019, we recorded 938 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 850 mt at 30 September 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 September 2019
31 December 2018
ASSETS
 
 
Non-current assets
1,493,735
923,050
Property, plant and equipment
488,254
408,201
Investments in joint ventures
563,535
244,500
Long-term loans and receivables
269,058
232,922
Current assets
502,368
293,320
Total assets
1,996,103
1,216,370
LIABILITIES AND EQUITY
 
 
Non-current liabilities
232,083
222,752
Long-term debt
147,830
170,043
Current liabilities
147,481
107,023
Total liabilities
379,564
329,775
Equity attributable to
PAO NOVATEK shareholders
 
1,598,467
868,254
Non-controlling interest
18,072
18,341
Total equity
1,616,539
886,595
Total liabilities and equity
1,996,103
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 LNG 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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