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NOVATEK announces consolidated IFRS results for third quarter and nine months 2014

Moscow, 29 October 2014. OAO NOVATEK today released its consolidated interim condensed financial information as of and for the three and nine months ended 30 September 2014 prepared in accordance with International Financial Reporting Standards (“IFRS”). 

 

IFRS Financial and Operational Highlights
(in millions of Russian roubles) 

3Q 2014

3Q 2013

 

9M 2014

9M 2013

84,090 

75,541

Oil and gas sales

260,504 

213,907

643

107

Other revenues

1,275

336

84,733 

75,648

Total revenues

261,779 

214,243

(55,870)

(47,080)

Operating expenses

(165,415)

(137,749)

-

-

Net gain on disposal of interests
in joint ventures

2,623

-

100

36

Other operating income

1,850

693

28,963

28,604

Profit from operations

100,837

77,187

34,129

32,246

Normalized EBITDA
of subsidiaries*

109,991

86,716

38,757

34,428

Normalized EBITDA
including share in EBITDA
of joint ventures*

122,059

92,714

(6,019)

(27)

Finance income (expense)

(9,531)

(5,406)

(11,777)

647

Share of profit (loss) of joint
ventures, net of income tax

(9,731)

338

11,167

29,224

Profit before income tax

81,575

72,119

7,503

23,432

Profit

64,526

57,828

7,627

23,458

Normalized Profit attributable
to OAO NOVATEK shareholders*

62,633

57,886

2.53

7.75

Normalized basic and diluted
earnings per share*
(in Russian roubles)

20.72

19.10

 * Excluding the effect from disposal of interests in joint ventures in 1Q 2014.

Total revenues in the third quarter and nine months 2014 increased by 12.0% and 22.2%, respectively, as compared to the corresponding periods of 2013. The growth was mainly due to an increase in sales volumes of liquid hydrocarbons and natural gas as well as an increase in the average sales price of natural gas. The increase of total revenues for nine months 2014 was also positively impacted by the growth in the average sales price of liquid hydrocarbons.

Growth in the average natural gas sales price was driven by higher share of end customers in our overall natural gas sales volumes mix, whereas the start of sales of higher value added products from the Ust-Luga Gas Condensate Fractionation and Transshipment Complex launched in June 2013 had a positive impact on the average price of liquids.

In the third quarter 2014, we recorded a year-on-year increase of 5.8% in the Company’s Normalized EBITDA, inclusive of subsidiaries, which totaled RR 34.1 billion. The Normalized EBITDA, including our respective share in the EBITDA of joint ventures, increased by 12.6% as compared to the third quarter 2013 and amounted to RR 38.8 billion. The Company’s Normalized EBITDA, inclusive of subsidiaries, for the first nine months 2014, adjusted for the effect on disposal of the 20% share in Artic Russia B.V., amounted to RR 110.0 billion, while the Normalized EBITDA, including our respective share in the EBITDA of joint ventures (adjusted for the effect on disposal of the share in Artic Russia B.V.) was RR 122.1 billion, which represented an increase of 26.8% and 31.7%, respectively, as compared to the nine months of 2013. The growth in our Normalized EBITDA was positively impacted by a higher share of liquid hydrocarbons in our overall sales volumes mix as well as higher liquids sales margins due to the launch of the Ust-Luga Complex.

In the third quarter 2014, Normalized Profit attributable to NOVATEK shareholders decreased by 67.5% as compared to the third quarter 2013 and amounted to RR 7.6 billion or RR 2.53 per share. Normalized Profit attributable to shareholders of OAO NOVATEK (adjusted for the effect on disposal of the share in Artic Russia B.V.) in the first nine months 2014 increased to RR 62.6 billion (RR 20.72 per share), or by 8.2% as compared to the same period of 2013. Our profit dynamics over the respective reporting periods were negatively impacted by non-cash foreign exchange effects (including at the joint ventures level) as the Russian rouble depreciated against the US Dollar by 20.3% since 31 December 2013. Net of these effects our normalized profit in the third quarter and nine months 2014 increased by 13.2% and 37.0%, respectively, as compared to the corresponding periods of 2013.

 

Natural Gas Production and Purchased Volumes

3Q 2014

3Q 2013

 

9M 2014

9M 2013

15,196

14,251

Natural gas production including
proportionate share in the production
of joint ventures,
million cubic meters (mmcm)

45,858

45,067

12,901

12,199

including natural gas production by
subsidiaries, mmcm

39,430

38,648

1,270

1,744

Natural gas purchases from joint ventures,
mmcm

2,929

5,567

1,815

1,441

Other purchases of natural gas, mmcm

5,340

4,920

15,986

15,384

Total natural gas production of subsidiaries
and purchases, mmcm

47,699

49,135

 

 Liquids Production and Purchased Volumes

3Q 2014

3Q 2013

 

9M 2014

9M 2013

1,533

1,136

Liquids production including proportionate
share in the production of joint ventures,
thousand tons (mt)

4,275

3,511

1,065

1,045

including liquids production by subsidiaries, mt

3,244

3,244

879

272

Liquids purchases from joint ventures, mt

1,939

776

33

3

Other purchases of liquids, mt

46

7

1,977

1,320

Total liquids production by subsidiaries and
purchases, mt

5,229

4,027

 

Hydrocarbon Sales Volumes

3Q 2014

3Q 2013

 

9M 2014

9M 2013

14,944

14,403

Natural gas, mmcm

48,244

47,770

14,107

12,928

including sales to end-customers, mmcm

45,388

42,568

1,025

690

Stable gas condensate products, mt

3,077

690

361

257

Liquefied petroleum gas, mt

1,043

783

241

162

Crude oil, mt

659

463

67

241

Stable gas condensate, mt

142

2,083

3

3

Other oil products, mt

8

8

In the third quarter 2014, our natural gas sales volumes increased to 14.9 billion cubic meters (bcm), or by 3.8%, as compared with the corresponding period in 2013, due to an increase in production volumes of our subsidiaries at the Yurkharovskoye field and the Olimpiyskiy license area.

For the first nine months 2014, our natural gas sales volumes increased by 1.0% as compared to the first nine months 2013, and aggregated 48.2 bcm. The growth was driven by higher production volumes of our subsidiaries and changes in gas volumes in the underground storages, which was partially offset by a decrease in sales volumes of purchased gas due to termination of natural gas purchases from Sibneftegas following the divestment of our share in this joint venture in December 2013.

The share of end-customers in our overall gas sales volumes mix increased from 89% in the first nine months 2013 to 94% in the same period of 2014. As at 30 September 2014, the total amount of natural gas, injected into the underground storages and recorded as inventory, amounted to 2.6 bcm as compared to 2.4 bcm as at 30 September 2013.

Liquid hydrocarbon sales volumes in the third quarter and nine months 2014 increased by 25.4% and 22.4%, respectively. Sales volumes were positively impacted by higher volumes of gas condensate purchased from our joint ventures due to production growth at Nortgas and the SeverEnergia fields, as well as by an increase in crude oil production by our subsidiaries. However this positive impact was partially offset by an increase of liquid hydrocarbon inventory in the third quarter and nine months 2014 as compared with a decrease in the corresponding periods in 2013. As at 30 September 2014, 552 thousand tons of stable gas condensate and oil products were in transit or storage and recognized as inventory compared to 378 thousand tons as at 30 September 2013.

 

 Selected Balance Sheet Items
(in millions of Russian roubles) 

  

  30 September 2014

31 December 2013

ASSETS

 

 

Non-current assets

563,684 

515,569 

Property, plant and equipment

281,328 

243,688 

Investments in joint ventures

182,377 

210,066 

Total current assets

105,882 

82,426 

Total assets

669,566 

597,995 

LIABILITIES AND EQUITY

 

 

Non-current liabilities

199,706 

165,065 

Long-term debt

171,800 

141,595 

Current liabilities

42,424 

59,873 

Total liabilities

242,130 

224,938 

Equity attributable to
OAO NOVATEK shareholders 

424,892 

370,198 

Non-controlling interest

2,544 

2,859 

Total equity

427,436 

373,057 

Total liabilities and equity

669,566 

597,995 

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”.