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NOVATEK announces consolidated IFRS results for the first quarter 2010

Moscow, 14 May 2010. OAO NOVATEK today released its consolidated interim condensed financial information for the three months ended 31 March 2010 prepared in accordance with International Financial Reporting Standards (“IFRS”).

 

IFRS Financial and Operational Highlights

(in millions of Russian roubles)
 

 1Q 20101Q 2009
Revenues
Oil and gas sales27,23716,316
Sales of polymer and insulation tape469397
Other revenues36268
Total revenues27,74216,981
Total operating expenses(15,947)(11,379)
Net gain (loss) on disposal of interest in subsidiaries1,583-
Other operating income (loss)(5)57
Profit from operations13,3735,659
Finance income (expense)612(2,908)
Profit before income tax13,9842,735
Profit for the year11,0762,139
Profit (loss) attributable to shareholders of
OAO NOVATEK
11,1822,134
(in Russian roubles)3.690.70

In the first quarter 2010, our total revenues increased by 63.4% to RR 27,742 million compared to RR 16,981 million in the corresponding period of 2009, primarily due to an increase in natural gas, stable gas condensate and LPG sales volumes and prices.

We recorded a more than five-fold increase in profit attributable to NOVATEK shareholders, which amounted to RR 11,182 million, or RR 3.69 per share, as compared to the corresponding period in 2009, and was primarily due to higher revenues and a net gain on disposal of our interest in ZAO Terneftegas, which was comprised of a non cash RR 807 million revaluation of NOVATEK’s remaining 51% interest in the asset and RR 776 million in net consideration for the disposal of our 49% interest. The Company also realized a non-cash foreign exchange gain during the period of RR 646 million compared to a non-cash foreign exchange loss of RR 3,025 million in the 2009 period.

According to NOVATEK’s Chief Financial Officer, Mark Gyetvay, “The continuation of our strong earnings momentum in the first quarter 2010 was primarily due to the recovery of domestic demand, seasonality factors and rising commodity prices.”

Selected Operating Highlights

 

Production and Purchased Volumes1Q 20101Q 2009
Natural gas production (million cubic meters)9,8478,173
Natural gas purchases (million cubic meters)-290
Total natural gas production and purchases9,8478,463
Liquids production (thousand tons)862709
Liquids purchases (thousand tons)5-
Total liquids production and purchases867709
Sales Volumes1Q 20101Q 2009
Natural gas (million cubic meters)10,1068,563
Stable gas condensate (thousand tons)412393
Liquefied petroleum gas (thousand tons)225156
Crude oil (thousand tons)4456
Oil products (thousand tons)33


Sales volumes of natural gas increased in the first quarter 2010 due to an increase in NOVATEK’s production capacity and higher natural gas demand in the domestic market. We continued to demonstrate strong organic production growth at the Yurkharovskoye field resulting from the launch of the second stage of phase two development in October 2009 as well as an increase in natural gas production from the East-Tarkosalinskoye and Khancheyskoye fields, due to the normalization of production from these fields to meet demand.

Total liquids sales volumes increased in the 2010 period due to higher production volumes driven primarily by the organic production growth at the Yurkharovskoye field as well as increased production from the Khancheyskoye field. The higher production volumes in the first quarter 2010 were offset by an increase in our stable gas condensate inventory balance. At 31 March 2010, we recorded 277 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 111 thousand tons as at 31 December 2009.

“The growth in our core operating results in the first quarter of 2010 was the result of our strategic efforts to eliminate production constraints” stated Leonid V. Mikhelson, CEO NOVATEK. “Our investments in new production capacity allowed us to supply the necessary natural gas volumes to meet increased domestic demand and capitalize on the higher pricing environment.”

Selected Items from the Statement of Financial Position

(in millions of Russian roubles)

 31 March 201031 December 2009
ASSETS  
Non-current assets177,131166,264
Property, plant and equipment, net172,494161,448
Total current assets27,78426,867
Total assets204,915193,639
LIABILITIES AND EQUITY  
Non-current liabilities29,58036,602
Long-term debt15,24723,876
Current liabilities28,45823,593
Total liabilities58,03860,199
OAO NOVATEK shareholders125,512114,301
Non-controlling interest21,36519,139
Total equity146,877133,440
Total liabilities and equity204,915193,639

The full set of reviewed 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).

***

Certain statements in this press release are not historical facts and are “forward looking” within the meaning of Section 27A of the Securities Act and Section 21E of the US Securities Exchange Act of 1934 (hereinafter, the Exchange Act). Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industries and the political and legal environment in which we operate and other information that is not historical information. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward looking statements will not be achieved.


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”.