Rosneft profit misses estimates as ruble counters oil price
MOSCOW (Bloomberg) – Rosneft said first-quarter profit climbed 8.3% as higher crude prices were offset by a stronger ruble and output cuts.
Net income rose to 13 billion rubles ($220 million) from 12 billion rubles a year earlier, the Moscow-based company said in a statement Friday. That missed the 17.8 billion-ruble average estimate of six analysts surveyed by Bloomberg. Revenue gained by more than a third to 1.41 trillion rubles.
The “environment remains difficult,” CEO Igor Sechin said in the statement. “Continuing world commodity-markets volatility, ruble appreciation -- all of this impacted the company’s financial results.”
While Brent crude rose 55% from a year earlier to average $54.61/bbl in the quarter after Russia and OPEC agreed to curb supply to manage a global glut, Rosneft reined in output to comply with the deal. The ruble has also strengthened with the oil price, increasing the cost of services such as drilling for Russian companies.
“The ruble stinks, for sure,” said Alexander Kornilov, an oil analyst at Aton. “It dried out the effect of the higher oil price in the first quarter after the OPEC deal.”
The deal with OPEC is good for Russia’s state budget, which captures the bulk of price increase, but less so for producer earnings, Kornilov said in an email. Russia is inclined to extend the six-month agreement to curb output, Energy Minister Alexander Novak said on Thursday.
On Friday, oil slid below $45/bbl for the first time since OPEC agreed to cut output in November as U.S. shale confounds the producer group’s attempts to prop up prices.
Production Impact
Earnings before interest, taxation, depreciation and amortization rose 22% to 333 billion rubles, after Rosneft acquired regional producer Bashneft last year. That beat the 308 billion-ruble estimate from analysts.
Capital expenditure rose 57% to $3.3 billion from a year earlier, yet fell 11% from the previous quarter. Free cash flow fell 7% to $1.4 billion from the previous year, but was more than triple the fourth-quarter figure.
Average oil output in the first quarter was 70,000 bpd less than October levels, the benchmark for the OPEC agreement, Rosneft said on May 3. Total oil and gas output rose 11% to the equivalent of 5.79 MMbpd from the first quarter of 2016.
“It was a tough quarter for Russian oils as a whole, so nobody was holding their breath,” Kornilov said. “Nonetheless Rosneft doesn’t look bad at an operating and cash flow level."
