Russia’s Rosneft second quarter net profit down 15% on tainted oil crisis

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MOSCOW- Russia’s largest oil producer Rosneft posted on Wednesday a 15% fall in second-quarter net profit hit by lower prices and weak oil production due to a domestic crude contamination crisis.

Rosneft, which accounts for over 40% of oil production in Russia, said earlier this week that its oil production in the second quarter was up 0.3% to 4.62 million barrels per day (bpd) in annual terms, but down almost 3% from the first quarter due to the tainted oil scandal and global oil deal curbs.

Russia’s oil exports were thrown into crisis this year when oil transported to Europe via the Druzhba pipeline was contaminated by chlorides. Moscow managed to restore supplies in a couple of months.

Last month Transneft curbed oil intake from Yuganskneftegaz, the main upstream unit of Rosneft.

Rosneft reported a net profit of 194 billion roubles ($3 billion), down from 228 billion roubles in the same period a year ago.

It generated 2.1 trillion roubles in revenue in the quarter, largely flat from a year ago, while earnings before interest, taxes, depreciation, and amortization (EBITDA) were 515 billion roubles, down from 565 billion roubles in the year-ago quarter.

“The main reason for the underwhelming results was the Transneft situation,” Aton brokerage said in a note.

Rosneft did not explain the fall in net profit in its statement but said that the price of the Urals, Russia’s main oil export blend, was at $67.9 per barrel in the second quarter versus $72.5 per barrel a year ago.

Investors were, however, cheered after the company declared a first-half dividend of 15.34 roubles per share or 50% of the company’s net profit. Rosneft shares were up by 1.3% at 0845 GMT, outperforming a wider index which was largely flat.

Rosneft also said its financial debt and trading liabilities had fallen by 14%, or by more than 800 billion roubles, since the beginning of 2019.

Net debt and trading liabilities declined by 157 billion roubles in the first half of 2019 and its net debt was 1.3 times core earnings in rouble terms at the end of the quarter.

Reuters

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