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NOVATEK announces second quarter and first half 2010 IFRS results

Moscow, 13 August 2010. OAO NOVATEK today released its consolidated interim condensed financial information for the three and six months ending 30 June 2010 prepared in accordance with International Financial Reporting Standards (“IFRS”).

IFRS Financial and Operational Highlights

(in millions of Russian roubles) 

2Q 20102Q 2009 1H 20101H 2009
  Revenues  
25,05122,376Oil and gas sales52,28838,692
611501Sales of polymer and insulation tape1,080898
44271Other revenues80539
25,70623,148Total revenues53,44840,129
(15,717)(15,038)Total operating expenses(31,664)(26,417)
-52in subsidiaries1,58352
29(210)Other operating income (loss)24(153)
10,0187,952Profit from operations23,39113,611
(1,078)1,103Finance income (expense)(466)(1,805)
8,9319,066Profit before income tax22,91511,801
7,0667,163Profit for period18,1429,302
7,1397,178Profit (loss) attributable to
OAO NOVATEK shareholders
18,3219,312
2.352.37(in Russian roubles)6.033.07

In the second quarter 2010, total revenues grew by 11.1% to RR 25,706 million, as compared to the corresponding period in 2009, primarily due to higher natural gas and liquid hydrocarbons’ prices as well as increased sales volumes of natural gas and liquefied petroleum gas (LPG).

Profit from operations increased by RR 2,066 million, or by 26.0%, in the second quarter 2010 as compared to the corresponding reporting period. The increase in operating profits was mainly attributable to growth in revenues and our continued focus on controlling operating expenses. The Company’s profit for the period was adversely affected by the depreciation of the Russian rouble relative to the US dollar, and, as a result, profit attributable to NOVATEK shareholders in the second quarter 2010 decreased by 0.5% to RR 7,139 million, or RR 2.35 per share, due to a non-cash foreign exchange loss during the 2010 period compared to a non-cash foreign exchange gain in the 2009 period.

In the first half 2010, oil and gas sales grew by 35.1% to RR 52,288 million, as compared to the corresponding period in 2009, as a result of increased natural gas and LPG sales volumes and the overall increase in natural gas and liquid hydrocarbons’ prices.

Profit from operations increased by RR 9,780 million, or by 71.9%, in the first half 2010 as compared to the corresponding reporting period primarily due to strong revenue growth in our core oil and gas operations and the net gain on the disposal of our interest in ZAO Terneftegas in the first quarter 2010. As a result, profit attributable to NOVATEK shareholders in the first half 2010 increased by 96.7% to RR 18,321 million, or RR 6.03 per share.

“We are very pleased with the strong financial and operational results achieved by the Company in the second quarter and first half 2010, which was largely attributable to increasing natural gas and gas condensate production volumes, strengthening of fundamental commodity prices and our continued focus on cost control and field optimization” according to Leonid V. Mikhelson, CEO and Chairman of the Management Board.

Selected Operating Highlights 

2Q 20102Q 2009Production and Purchase Volumes1H 20101H 2009
8,2767,563(million cubic meters)18,12315,736
-159(million cubic meters)-449
8,2767,722Total natural gas production and purchases18,12316,185
879759Liquids production (thousand tons)1,7411,468
1-Liquids purchases (thousand tons)6-
880759Total liquids production and purchases1,7471,468
     
2Q 20102Q 2009Sales Volumes1H 20101H 2009
7,9097,704Natural gas (millions cubic meters)18,01516,267
539658Stable gas condensate (thousand tons)9511,051
231188Liquefied petroleum gas (thousand tons)456344
4845Crude oil (thousand tons)92101
33Oil products (thousand tons)66

In the second quarter and first half 2010, our natural gas sales volumes increased by 2.7% and 10.7%, respectively, compared to the corresponding periods in 2009. The increases were primarily due to the optimization of our customer base, the cold winter weather in the first three months of 2010, and continued economic recovery on the Russian domestic market, which was partially offset by an increase of 357 million cubic meters in our natural gas inventory balance as of 30 June 2010.

During the second quarter 2010, our total liquids’ sales volumes decreased by 8.2% whereas our total liquids’ volumes in the first half of 2010 remained relatively unchanged compared to the corresponding periods in 2009. The decrease in liquids’ sales volumes in the second quarter 2010 was primarily due to an increase in stable gas condensate inventories which was offset by higher sales volumes of LPG as a result of increased throughput at the Purovsky Processing Plant. At 30 June 2010, we recorded 332 thousand tons of stable gas condensate in transit or storage and recognized as inventory until such time as it is delivered to the port of destination as compared to 172 thousand tons as of 30 June 2009.

Selected Balance Sheet Items

(in millions of Russian roubles)

  30 June 201031 December 2009
ASSETS  
Non-current assets181,165166,264
Property, plant and equipment, net176,929161,448
Total current assets35,77826,867
Total assets216,943193,639
LIABILITIES AND EQUITY  
Non-current liabilities38,16636,602
Long-term debt23,76523,876
Current liabilities28,93023,593
Total liabilities67,09660,199
OAO NOVATEK shareholders129,156114,301
Non-controllinginterest20,69119,139
Total equity149,847133,440
Total liabilities and equity216,943193,639

The full set of consolidated interim condensed IFRS financial information, 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”.