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NOVATEK Announces Consolidated IFRS Results for the Third Quarter and the Nine Months 2021

Moscow, 27 October 2021. PAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three and nine months ended 30 September 2021 prepared in accordance with International Financial Reporting Standards (“IFRS”). 

IFRS Financial Highlights
(in millions of Russian roubles except as stated)
3Q 2021
3Q 2020
 
9M 2021
9M 2020
269,877 
161,211 
Oil and gas sales
771,178 
484,447 
6,830 
2,560 
Other revenues
14,564 
7,825 
276,707 
163,771 
Total revenues
785,742 
492,272 
(207,057)
(125,570)
Operating expenses
(581,040)
(388,344)
662 
Net gain on disposal of interests in subsidiaries
662 
984 
352 
Other operating income (loss)
548 
(46,961)
70,634 
38,553 
Normalized profit from operations*
205,250 
104,790 
84,886 
51,260 
Normalized EBITDA of subsidiaries*
244,758 
134,298 
181,800 
93,883 
Normalized EBITDA including share in
EBITDA of joint ventures
*
488,866 
265,821 
(2,743)
88,487 
Finance income (expense)
(15,783)
179,037 
61,978 
(86,804)
Share of profit (loss) of joint ventures,
net of income tax
135,189 
(160,028)
130,531 
40,236 
Profit before income tax
325,318 
75,976 
112,906 
13,172 
Profit attributable to
shareholders of PAO NOVATEK
277,345 
24,056 
104,937 
35,720 
Normalized profit attributable to
shareholders of PAO NOVATEK
*, excluding
the effect of foreign exchange gains (losses)
269,668 
110,487 
34.95 
11.89 
Normalized basic and diluted earnings per share*,
excluding the effect of foreign exchange gains
(losses) (in Russian roubles)
89.81 
36.77 
47,566 
39,821 
Cash used for capital expenditures
136,393 
142,304 
* Excluding the effects from disposal of interests in subsidiaries and joint ventures (recognition of a net gain on disposal and subsequent non-cash revaluation of contingent consideration).

COVID-19 and Macro-Economic Environment

In 2021, the global economic activity began a gradual improvement from the negative influence of the COVID-19 virus, but questions remain on the sustainability of this recovery. Various countries have reported rising infection rates, the emergence of new virus strains (Delta and Lambda variants) and differing degrees of vaccination penetration. These have all led to stricter lockdown measures in some countries and growing uncertainties on the pace of global economic recovery.

Under these factors, the OPEC+ participants maintained restricted crude oil production targets that, together with the severe cold weather in Europe, Asia, and North America in the beginning of the year, has led to significant increases in benchmark hydrocarbons prices in the first quarter 2021. Starting from May 2021, OPEC+ began to gradually lift the restrictions on crude oil production targets due to the increased mobility of population, signs of renewed economic activities and the recovery of crude oil demand in major consumer countries. In July 2021, the OPEC+ participants made a decision to further increase crude oil production volumes and extended the agreement on production restrictions until the end of 2022.

Nevertheless, the crude oil supply still lagged behind global demand due to faster than expected economic recovery. Benchmark crude oil prices continued to increase in the second and third quarters 2021 and this increase has positively affected our sales prices in the reporting period.

The European and Asian natural gas markets were impacted by demand recovery, weather factor (cold winter and hot summer, low wind speeds in Europe and droughts in South America) and supply disruptions that have led to low storage levels in key consuming regions and a strong price rally in the third quarter 2021.

Further developments surrounding the COVID-19 virus spread remain uncertain and are outside of the Group’s management control, and the scale and duration of these developments are difficult to assess. Despite these uncertainties, the Group continues to demonstrate strong operating results and implement its investment projects in accordance with the Group’s approved corporate strategy. The Group’s management continues to assess the current situation and present macro-economic environment and takes appropriate actions if deemed necessary.

Revenues and EBITDA

In the third quarter 2021, our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, amounted to RR 276.7 billion and RR 181.8 billion, respectively, representing increases of 69.0% and 93.6% as compared to the prior year period. In the nine months ended 30 September 2021, our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, amounted to RR 785.7 billion and RR 488.9 billion, respectively, representing increases of 59.6% and 83.9%, as compared to the corresponding period in 2020.

The increases in total revenues and Normalized EBITDA were largely due to an increase in global commodity prices for hydrocarbons, as well as the launch of gas condensate deposits of the North-Russkiy cluster in August 2020.

Profit attributable to shareholders of PAO NOVATEK

Profit attributable to shareholders of PAO NOVATEK increased to RR 112.9 billion (RR 37.60 per share) in the third quarter 2021 and to RR 277.3 billion (RR 92.36 per share) in the nine months 2021 as compared to RR 13.2 billion and RR 24.1 billion, respectively, in the corresponding periods in 2020.

Normalized profit attributable to shareholders of PAO NOVATEK (excluding the effects from foreign exchange differences and the disposal of interests in subsidiaries) totaled RR 104.9 billion (RR 34.95 per share) in the third quarter 2021 and RR 269.7 billion (RR 89.81 per share) in the nine months 2021, representing increases of 2.9 times and 2.4 times, respectively, as compared to the corresponding periods in 2020.

The main factors positively impacting the Group’s Normalized profit in the third quarter and in the nine months 2021 were improved macroeconomic conditions, which resulted in an increase in our hydrocarbons sales prices, as well as the launch of new production facilities in August 2020.

Cash used for capital expenditures

Our cash used for capital expenditures amounted to RR 47.6 billion in the third quarter 2021 and to RR 136.4 billion in the nine months 2021 as compared to RR 39.8 billion and RR 142.3 billion, respectively, in the prior year corresponding periods. A significant portion of our capital expenditures was attributable to the development of our LNG projects, the ongoing development and launch of the fields within the North-Russkiy cluster (the North-Russkoye, East-Tazovskoye, Dorogovskoye and Kharbeyskoye fields), construction of a hydrocracker unit at our Ust-Luga Complex, the development of the Verhnetiuteyskiy and West-Seyakhinskiy license area, crude oil deposits of the East-Tarkosalinskoye and Yarudeyskoye fields, as well as capital spent on exploratory drilling.

Hydrocarbon Production
3Q 2021
3Q 2020
 
9M 2021
9M 2020
149.
150.4 
Total hydrocarbon production (million boe)
464.
445.9 
1.63 
1.63 
Total production (million boe per day)
1.70 
1.63 
19,001 
19,131 
Natural gas production including
proportionate share in the production of
joint ventures (mmcm)
59,107 
56,710 
10,310 
10,167 
Natural gas production by subsidiaries
31,918 
29,508 
8,691 
8,964 
Group’s proportionate share in the natural gas
production of joint ventures
27,189 
27,202 
3,01
3,023 
Liquids production including proportionate
share in the production of joint ventures (mt)
9,25
8,992 
1,622 
1,611 
Liquids production by subsidiaries
5,022 
4,665 
1,388 
1,412 
Group’s proportionate share in the liquids
production of joint ventures
4,228 
4,327 

In the third quarter 2021, our total natural gas and liquids production including our proportionate share in the production of joint ventures marginally decreased by 0.7% and 0.4%, respectively. The commissioning of gas condensate deposits within the fields of the North-Russkiy cluster (the North-Russkoye and East-Tazovskoye) in August 2020 almost offset the declines in hydrocarbons production at mature fields of our subsidiaries and joint ventures.

In the nine months 2021, our total natural gas and liquids production increased by 4.2% and 2.9%, respectively, due the launch of new production facilities.

Hydrocarbon Sales Volumes
3Q 2021
3Q 2020
 
9M 2021
9M 2020
16,574 
16,563 
Natural gas (mmcm)
55,706 
54,149 
 
 
including:
 
 
14,867 
14,359 
Sales in the Russian Federation
49,731 
47,029 
1,707 
2,204 
Sales on international markets
5,975 
7,120 
4,01
3,771 
Liquids (mt)
12,227 
11,940 
 
 
including:
 
 
1,413 
1,348 
Stable gas condensate refined products
4,938 
4,937 
985 
1,093 
Crude oil
3,023 
3,347 
863 
723 
Liquefied petroleum gas
2,566 
2,135 
750 
603 
Stable gas condensate
1,689 
1,508 
Other petroleum products
11 
13 
In the third quarter and the nine months 2021, our natural gas sales volumes totaled 16.6 billion and 55.7 billion cubic meters (bcm), representing increases of 0.1% and 2.9%, respectively, as compared to the corresponding periods in 2020, mainly resulting from an increase in natural gas volumes sold on the domestic market due to the launch of additional production facilities, as well as higher demand from end-customers due to weather conditions. This positive effect was offset by a decline in natural gas volumes sold on the international markets due to a decrease in LNG sales volumes purchased primarily from our joint venture OAO Yamal LNG, as a result of an increase in the share of Yamal LNG’s direct LNG sales under long-term contracts and the corresponding decrease in LNG spot sales to shareholders, including the Group.

As at 30 September 2021, we recorded 1.8 bcm of natural gas in inventory balances compared to 1.5 bcm at 30 September 2020. Natural gas inventory balances fluctuate period on period and depend on the Group’s demand for natural gas withdrawals for the sale in subsequent periods.

In the third quarter and the nine months 2021, our liquid hydrocarbons sales volumes totaled 4.0 million and 12.2 million tons (mt), respectively, representing increases of 6.4% and 2.4%, as compared to the corresponding periods in 2020. The increase was primarily due to gas condensate production growth, as well as changes in inventory balances. As at 30 September 2021, we recorded 912 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 945 mt at 30 September 2020. 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 2021
31 December 2020
ASSETS
 
 
Non-current assets
1,799,500 
1,696,244 
Property, plant and equipment
836,828 
729,407 
Investments in joint ventures
508,008 
450,632 
Long-term loans and receivables
330,061 
391,053 
Current assets
656,825 
362,934 
Total assets
2,456,325 
2,059,178 
LIABILITIES AND EQUITY
 
 
Non-current liabilities
244,503 
260,755 
Long-term debt
153,399 
168,988 
Current liabilities
449,746 
159,996 
Total liabilities
694,249 
420,751 
Equity attributable to
PAO NOVATEK shareholders
 
1,745,349 
1,619,964 
Non-controlling interest
16,727 
18,463 
Total equity
1,762,076 
1,638,427 
Total liabilities and equity
2,456,325 
2,059,178 

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”.