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ROSNEFT OIL COMPANY Q2 AND H1 2023 RESULTS

30 August 2023
  • IN H1 2023, LIQUIDS PRODUCTION AMOUNTED TO 4.0 MLN BARRELS PER DAY
  • IN Q2 2023, LIQUIDS PRODUCTION DECREASED BY 2.2% QUARTER-ON-QUARTER TO 3.9 MLN BARRELS PER DAY ON THE BACK OF THE PRODUCTION CAP
  • IN H1 2023, GAS PRODUCTION INCREASED BY 31.8% TO 1.5 MLN BOE PER DAY
  • IN H1 2023, EBITDA AMOUNTED TO RUB 1,401 BLN, AND TO RUB 729 BLN IN Q2 2023
  • IN H1 2023, NET INCOME ATTRIBUTABLE TO ROSNEFT SHAREHOLDERS AMOUNTED TO RUB 652 BLN
  • NET DEBT / EBITDA RATIO AT THE END OF H1 2023 AMOUNTED TO 1.2X

Rosneft Oil Company PJSC (hereinafter – Rosneft, the Company) publishes its results for Q2 and H1 2023 prepared in accordance with International Financial Reporting Standards (IFRS).

 Q2 2023Q1 2023Change, %H1 2023H1 2022Change, %
  RUB bln (except %)
Sales revenue and equity share in profits of associates and joint ventures 2,043 1,823 12.1% 3,866 5,172 (25.3)%
EBITDA 729 672 8.5% 1,401 1,476 (5.1)%
Net   income attributable to Rosneft shareholders 329 323 1.9% 652 449 45.2%
CAPEX 324 275 17.8% 599 527 13.7%

Igor Sechin, Chairman of the Management Board and Chief Executive Officer of Rosneft said:

"Following successful implementation of existing projects and launch of new ones, in H1 2023, the Company achieved high growth rates of its operating indicators. In particular, Rosneft came out on top among independent gas producers, increasing production by almost a third. Daily liquids production grew by almost 7%. However, in Q2 2023, given external production constraints, the Company had to reduce its output. I should note that Rosneft has been limiting crude oil production in one way or another since 2017, which prevents the Company from fully unleashing its potential.

The Company has maintained sustainable financial performance despite market price volatilities. To a large extent, this becomes possible due to our continuous effort to control costs. For example, in Q2 2023 the upstream lifting costs on a unit basis decreased to USD 2.8 per barrel of oil equivalent. On the other hand, the changing tax environment, including legislative changes already enacted and new initiatives, makes the Company's operations more challenging.

Despite the complex external environment, Rosneft continues to implement major investment projects.

In August 2023, Rosneft completed on time the payment of the final dividends for 2022 totaling more than RUB 190 billion."

Operating Performance

Upstream

In H1 2023, liquids production amounted to 4.0 mln barrels per day (97.0 mln tons). In Q2 2023, liquids production reduced by 2.2% QoQ to 3.9 mln barrels per day (48.2 mln tons) due to the introduction of the oil production cap in Russia since March 2023.

In H1 2023, gas production increased by 31.8% compared to H1 2022 and reached 1.5 mln boe per day (43.7 bcm). The increase was attributable to the ramp-up of production at existing projects, as well as the launch of greenfield gas projects in the Yamalo-Nenets Autonomous District in 2022. In Q2 2023, Rosneft reduced gas production by 8.7% QoQ to 1.4 mln boe per day (21.0 bcm) mainly due to the oil production cap and maintenance.

As a result, in H1 2023 the Company's hydrocarbon production reached 5.5 mln boe per day, up 12.7% YoY while in Q2 2023 hydrocarbon production decreased by 4.0% QoQ.

In H1 2023, Rosneft conducted 2.7 th. linear km of 2D seismic and 5.8 th. square km of 3D seismic onshore in Russia. Testing of 19 exploration wells was completed with a success rate of 90%.

In H1 2023, production drilling footage reached 5.9 mln meters, which is 6.3% higher YoY. Rosneft commissioned over 1.5 th. new wells, 69% of which were horizontal wells. The share of new horizontal wells with multistage hydraulic fracturing amounted to 46%. The unit production per horizontal well is twice as much as per one directional well.

Vostok Oil Project

In H1 2023, the Company conducted over 2.2 th. linear km of 2D seismic and 1.6 th. square km of 3D seismic, completed drilling of 2 exploration wells and started drilling another 3 wells, with 8 more wells being tested within the framework of the flagship Vostok Oil project.

As part of the pilot development of the Payakha cluster, in H1 2023 the Company drilled 27 th. meters and completed drilling of 8 production wells.

Preparatory work for drilling of 6 production wells is underway as part of the pilot development of the Ichemminskoye field. In July 2023, the Company started pilot development of another field, Baikalovskoye, where a drilling rig is currently being mounted to drill 6 wells. The field has initial recoverable reserves of 81 bcm of gas and 43 mln tons of oil.

The Company continues construction of the Vankor – Paiyakha – Bukhta Sever trunk oil pipeline and the Bukhta Sever Port oil terminal, as well as construction of hydraulic engineering installations.

The construction of storage and transshipment facilities in the Yenisei basin is also underway, as well as the construction of hydraulic engineering installations, and the expansion of coastal and berthing infrastructure. During the summer navigation period along the Yenisei River and the Northern Sea Route, over 800,000 tons of construction materials and equipment are planned to be delivered to the project facilities.

Downstream

In H1 2023, the Company processed 44.1 mln tons of crude oil in Russia, which is 9.2% higher compared to H1 2022. In Q2 2023, refinery throughput in Russia was 21.5 mln tons of crude oil, down 5.1% QoQ, mainly due to seasonal turnarounds.

The Company has been consistently working to develop local technologies and import substitution, in particular, supplying its refineries with in-house catalysts required to produce high-quality motor fuel. In H1 2023, 780 tons of diesel hydrotreatment catalysts and protective layer catalysts were produced. 75% of this volume was supplied to the Company's refineries and another 25% to third party customers. The Company's enterprises also produced 175 tons of reforming catalysts and 55 tons of hydrogen production catalysts. 340 tons of regenerated diesel hydrotreating catalysts were reactivated.

Financial Performance

The Company's H1 2023 revenue1 amounted to RUB 3,866 bln, down 25.3% YoY, primarily due to a significant drop in oil prices. At the same time, revenue for Q2 2023 increased by 12.1% reaching RUB 2,043 bln. In settlements with its counterparties for export supplies, the Company prioritizes payments in rubles and national currencies of friendly countries.

In H1 2023, EBITDA amounted to RUB 1,401 bln, which is 5.1% lower than for the same period in the previous year. The better EBITDA dynamics compared to revenue is due to increased sales volumes in the eastern direction, higher profitability of export operations and cost control. The EBITDA margin was 36.0%. EBITDA for Q2 2023 increased by 8.5% reaching RUB 729 bln.

In H1 2023, the net income attributable to Rosneft shareholders was RUB 652 bln. This indicator for Q2 2023 amounted to RUB 329 bln.

CAPEX in H1 2023 reached RUB 599 bln, up 13.7% YoY, due to the scheduled Upstream activities.

In H1 2023, free cash flow increased by 21.9% YoY to RUB 434 bln. Free cash flow has remained positive for twelve consecutive quarters.

Net debt / EBITDA ratio at the end of H1 2023 was 1.2x (in US dollar terms). The high level of financial strength continues to be also supported by the substantial amount of liquid financial assets on the Company's balance sheet and available credit lines.

The Company’s sustainable performance drives its stock price dynamics: since the beginning of 2023, Rosneft share price at the Moscow Stock Exchange has increased by 1.5 times while Company market cap reached nearly RUB 6 trln. Exponential growth in the number of Russian shareholders is another evidence of investor confidence in the Company: the number of individual shareholders of Rosneft rose by 4.5 times from 200 to almost 900 th. people in 2021-2023.

ESG

In H1 2023, the Company continued its efforts to achieve the Sustainable Development Goals as part of the Rosneft-2030: Reliable Energy and Global Energy Transition strategy.

Rosneft has been consistently developing the management system to ensure integrity of its production facilities and equipment with the goal of achieving a zero accident rate by 2030 or earlier. In H1 2023, the PSER-1 process safety event rate improved by 45% compared to Q1 2022, and the PSER-2 rate improved by 28%.

The Company strives to achieve zero fatal injuries and ensures that targets are aligned with management key performance indicators and remuneration. For example, while implementing the Work Controls Concept, managers are incentivized to have all hazardous operations carried out strictly on a scheduled basis. This measure is expected to increase the level of safety at work.

As part of the effort to minimize oil and petroleum product spills, measures are taken to replace field pipelines.

In H1 2023, no accidents or well control incidents (oil, gas or water show) during drilling operations were registered at the Company's facilities.

Rosneft became the Best Russian Oil and Gas Company in the World Benchmarking Alliance (WBA) international ranking and was among the top 10 global oil and gas companies on a number of sustainability indicators. The WBA ranking assesses the contribution of the world's 100 largest oil and gas companies to the achievement of the UN Sustainable Development Goals in terms of meeting social commitments and ensuring a just transition to a low-carbon economy.

1 This includes sales revenue and income from associated organizations and joint ventures.

Information and Advertising Department
Rosneft
August 30, 2023

These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.