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NOVATEK Announces Consolidated IFRS Results For Second Quarter and First Half 2016

Moscow, 27 July 2016. OAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three and six months ended 30 June 2016 prepared in accordance with International Financial Reporting Standards (“IFRS”). 

 
IFRS Financial Highlights
(in millions of Russian roubles)
2Q 2016
2Q2015
 
1H 2016
1H 2015
126,463
111,574
Oil and gas sales
264,674
224,798
925
670
Other revenues
2,065
1,188
127,388
112,244
Total revenues
266,739
225,986
(90,019)
(79,541)
Operating expenses
(187,178)
(153,437)
-
-
Net gain on disposal of interests in joint ventures
73,072
-
(1,731)
(158)
Other operating income (loss)
(760)
(357)
35,638
32,545
Profit from operations
151,873
72,192
46,276
37,317
Normalized EBITDA of subsidiaries*
97,099
82,021
59,507
49,511
Normalized EBITDA including share in EBITDA of joint ventures*
121,643
104,343
74
2,130
Finance income (expense)
990
(5,116)
19,623
13,004
Share of profit of joint ventures,
net of income tax
43,004
17,278
55,335
47,679
Profit before income tax
195,867
84,354
45,934
41,920
Profit attributable
to OAO NOVATEK shareholders
161,851
72,995
45,934
41,920
Normalized profit attributable
to OAO NOVATEK shareholders*
104,174
72,995
15.22
13.88
Normalized basic and diluted earnings per share* (in Russian roubles)
34.51
24.17
* Excluding the effect from disposal of interests in joint ventures.

In the second quarter and first half 2016, our total revenues increased by 13.5% and 18.0%, respectively, compared to the corresponding periods of 2015. Our Normalized EBITDA, inclusive of joint ventures, amounted to RR 59.5 billion in the second quarter 2016 and RR 121.6 billion in the first half 2016, representing an increase of 20.2% and 16.6%, respectively, as compared to the corresponding periods of 2015. The growth in our revenues and EBITDA was largely driven by substantial increase in liquids sales volumes and higher natural gas sales prices. The decrease in net average sales prices in rouble terms for certain types of liquid hydrocarbons due to changes in the respective market benchmarks had a negative impact on the dynamics of our revenues and EBITDA.  

In the second quarter 2016, profit attributable to NOVATEK shareholders increased to RR 45.9 billion (RR 15.22 per share), or by 9.6% as compared to the second quarter 2015. As a result, in the first half 2016, our profit amounted to RR 161.9 billion (RR 53.61 per share), representing an increase of 121.7% as compared to the first half 2015. Profit dynamics was positively impacted by the closing in the first quarter 2016 of a transaction for the sale of a 9.9% equity stake in Yamal LNG to the Silk Road Fund of China. Excluding profit from this transaction, normalized profit attributable to NOVATEK shareholders in the first half 2016 totalled RR 104.2 billion (RR 34.51 per share), representing a 42.7% increase as compared to the first half 2015. Our profit dynamics was also positively impacted by the non-cash items such as foreign exchange effect and the change in fair value of non-commodity financial instruments. 

Marketable Hydrocarbon Production and Purchased Volumes
2Q2016
2Q 2015
 
1H 2016
1H 2015
16,521
16,890
Natural gas production, million cubic meters (mmcm)
33,757
33,041
11,602
12,278
including production by subsidiaries, mmcm
23,778
24,739
1,840
1,615
Natural gas purchases from joint ventures, mmcm
4,589
3,238
1,939
1,596
Other purchases of natural gas, mmcm
3,950
3,145
15,381
15,489
Total natural gas production by subsidiaries and purchases, mmcm
32,317
31,122
3,119
2,198
Liquids production,
thousand tons (mt)
6,327
4,189
1,809
996
including production by subsidiaries, mt
3,664
2,052
2,450
2,184
Liquids purchases from joint ventures, mt
4,981
3,887
13
17
Other purchases of liquids, mt
44
21
4,272
3,197
Total liquids production by subsidiaries and purchases, mt
8,689
5,960
 
 
Hydrocarbon Sales Volumes
2Q 2016
2Q 2015
 
1H 2016
1H 2015
14,062
14,498
Natural gas, mmcm
31,837
30,475
13,045
13,502
including sales to end-users
29,139
28,579
4,139
2,911
Liquids, mt
8,781
5,745
 
 
including:
 
 
1,684
1,588
Stable gas condensate products
3,565
3,425
1,157
238
Crude oil
2,345
509
639
545
Stable gas condensate
1,507
821
656
537
Liquefied petroleum gas
1,359
985
3
3
Other petroleum products
5
5

Our natural gas sales volumes totalled 14.1 billion cubic meters (bcm) in the second quarter 2016 and 31.8 bcm in the first half 2016. Compared to the first half 2015 the sales volumes increased by 4.5% which was mainly due to the development of gas trading at the
Saint-Petersburg commodity exchange and higher volumes sold to traders. As at the end of the first half 2016, the total amount of natural gas recorded as inventory totalled 1.7 bcm compared to 1.6 bcm as at the end of the first half 2015.

In the second quarter 2016, liquid hydrocarbon sales volumes amounted to 4,139 mt, representing a 42.2% increase in volumes sold as compared to the second quarter 2015. As a result, in the first half 2016, liquid hydrocarbon sales volumes grew to 8,781 mt, representing a 52.8% increase as compared to the first half 2015. This significant growth was largely due to the launch of the Yarudeyskoye oil field in December 2015 and the Termokarstovoye and Yaro-Yakhinskoye gas and gas condensate fields in the first half 2015. The dynamics of our liquids sales volumes was also positively impacted by decrease in liquids inventories by 240 mt in the first half 2016 compared to the increase by 72 mt in the first half 2015. As at 30 June 2016, 670 mt of liquid hydrocarbons were in transit or storage and recognized as inventory.

Selected Balance Sheet Items
(in millions of Russian roubles)
 
  
 
30 June 2016
31 December 2015
ASSETS
 
 
Non-current assets
782,960
751,552
Property, plant and equipment
332,379
331,712
Investments in joint ventures
200,811
154,725
Long-term loans and receivables
222,565
230,799
Total current assets
125,163
120,485
-
7,987
Total assets
908,123
880,024
LIABILITIES AND EQUITY
 
 
Non-current liabilities
227,093
282,178
Long-term debt
194,150
252,050
Current liabilities
101,958
169,675
Total liabilities
329,051
451,853
Equity attributable to
OAO NOVATEK shareholders
 
572,930
426,079
Non-controlling interest
6,142
2,092
Total equity
579,072
428,171
Total liabilities and equity
908,123
880,024

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”.