Rosneft reported a more than trebling of second-quarter net profit and record free cash flow, as it pledged an end to costly acquisitions in favour of focusing on efficiency and organic growth.
The Russian oil producer’s shares closed up 1.8 per cent in Moscow at Rbs427.
The state-owned company, which accounts for more than 40 per cent of Russia’s crude production, has spent most of the past decade swallowing up rivals and splurging on overseas acquisitions, driving up output at the expense of its balance sheet.
“The second quarter was largely a reflection of the efforts of management to improve the efficiency of the company,” said Igor Sechin, chief executive.
The company, the world’s largest listed oil producer by output, in May announced a strategic overhaul to 2022, promising to cut debt by Rbs500bn ($7.9bn) and increase investor returns amid a recovery in global oil prices and a weathering of US sanctions against the company.
Those higher oil prices fuelled second-quarter results that showed a 235 per cent increase in net profit to Rbs228bn, the highest for more than four years, and comfortably more than analysts had estimated.
“Second-quarter profit beats even optimistic assumptions — [an] almost three times hike in bottom line, suggesting upside risk to consensus and strong [dividend] outlook,” said Kirill Tachennikov, director at BCS Global Markets.
Rosneft shares have risen almost 50 per cent in 2018, thanks to higher oil prices and a weakening rouble, which increases the company’s earnings per barrel. Rosneft also announced a $2bn share buyback programme on Monday, one of the main elements of its 2022 overhaul.
Since taking management control of the company in 2012, Mr Sechin — a long-time aide to Russian President Vladimir Putin — has embarked on a succession of acquisitions, including a $55bn purchase of TNK-BP in 2013, a $5.5bn deal for Bashneft in 2016, and overseas investments including assets in Venezuela, Kurdistan and a $13bn refinery in India.
That spending spree drove net debt to Rbs2.2tn ($35bn) at the end of June last year, raising investor concerns.
Rosneft said on Tuesday that net debt had fallen 12 per cent in US dollar terms without providing a new total figure. Short-term financial liabilities more than halved to $14.5bn from $38.7bn. While capital expenditure increased an annual 6.5 per cent during the second quarter, free cash flow rose almost six-fold.
“To date, the main strategic acquisitions made during periods of low oil prices have been completed. The company focuses on organic growth and monetisation of synergies from acquired assets,” Mr Sechin said. “We are actively working on the set initiatives to enhance shareholders returns. In the first half year the company more than halved its short-term financial liabilities.”
Rosneft said second-quarter revenue rose 47.6 per cent to Rbs2.1tn, and its ebitda margin increased to 27 per cent, from 21.2 per cent a year ago. While Rosneft’s crude production was flat compared with a year earlier, the price of benchmark Brent crude was roughly 11 per cent higher and the rouble was 9 per cent weaker during the quarter.
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