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“Rosneft” did you get a cheap barrel

"Роснефть" совладала с дешевым баррелем

The company has already almost equal to the cost of “Gazprom”

On Thursday, Rosneft, has reported its financial results for last year. Despite the fall in profit and revenue in dollar terms, the indicators look quite positive compared to other oil companies, both Russian and foreign. Analysts predict that in the coming months, Rosneft will become the most expensive company in Russia by market capitalization, ahead of Gazprom. And if you follow the estimates of fair value of certain investment banks, now both companies are practically the same.

Revenue for 2015 was $ 5150 billion rubles ($86,9 billion), a decrease of 6.4% compared to a year earlier. In the message “Rosneft” notes that, “despite worsening market conditions, the company increased the volume of high-margin oil supplies in the Eastern direction (+18,5%), increased volume of gas sales (3,8%) and products of oil refining and petrochemistry (+1%)”. Profit before interest, tax, depreciation and amortisation (EBITDA) rose last year by 17.8% to 1245 billion rubles ($20.8 billion). “Rosneft” has achieved growth despite the negative effect from the tax maneuver, in which the company lost 71 billion rubles, and the fall in oil prices, partly offset by the change of the ruble,” the stress in the company.

Control over costs has allowed “Rosneft” to be the lowest in the Russian oil industry — production costs unit operating costs amounted to RUR 159/b.N. uh. (Us$2.6/b.N. e.). Net profit in 2015 amounted to 355 billion rubles – an increase of 2% compared with a year earlier. Decreased significantly the debt burden — net debt was reduced last year by 47% in dollar terms and year-end amounted to us $23.2 billion Decline “was due to the repayment of a substantial part of short-term debt as a result of generation of operating cash flow and receipt of funds under long-term contracts for the supply of oil”.

Analysts say that the results were better than expected. “Macroeconomics in the fourth quarter was very weak, oil prices are low, but Rosneft managed to show very good results, exceed expectations on EBITDA and, in addition, free cash flow remained relatively strong, partly due to the fact that “Rosneft” not fully fulfilled its plan for capex,” said Alexander Kornilov from Aten. The fall in oil prices since summer 2014 is more than three times seriously affected the revenues of oil companies around the world. The drop in net profit at Exxon was 43%, and Chevron 51%, Shell – 76%, Statoil and BP received a loss. Net profit “Rosneft” in dollar terms, decreased by 34.4%.

In recent weeks several Western investment banks recommended buying shares of “Rosneft” – Credit Suisse, Morgan Stanley, Goldman Sachs. “Company “Rosneft” was fundamentally undervalued before the crisis, and today its market capitalization is, in fact, does not depend on real indicators, and the country factor and politically-motivated sanctions. By fundamental factors (production, cost, free cash flow, profits), “Rosneft” – one of the best in the industry. The level of tax burden on the company is not comparable to the performance of global majors, which, moreover, are not under sanctions,” told “Izvestia” in company. – We will continue to increase free cash flow and increase the efficiency of capital expenditure, including through the use of domestic oilfield services. “Rosneft” is able to keep the growth in operating costs below inflation (operating costs the company more than one and a half times lower than its closest Russian competitor)”.

“At “Rosneft” there is a great chance to catch up with Gazprom’s capitalisation in the coming months. The oil company a market capitalization of $47.7 billion, Gazprom — $50.8 billion But since the beginning of year “Rosneft” has risen in price by 30%, and Gazprom is only 16%,” said Alexander Kornilov. The analyst explains such dynamics by the fact that “in “Rosneft” this year will be much more positive, than “Gazprom”.

— From “Gazprom” now is a very difficult situation in the European markets, because the prices are the lowest since 2009, plus the demand for gas in Europe is stagnating, there is also the threat of competition from the United States and the Middle East. Buyers of gas have intensified in recent years and started to press for the revision of contract prices. More from Gazprom in 2016 is expected to be fairly serious sagging cash flow, and we do not think that “Gazprom” in the answer will seriously reduce its investment program. Rosneft, by contrast, is much more likely to show free cash flow we expect from her very good dynamics in oil production, they begin the launch of the Vankor cluster. Also “Rosneft” can receive up to $5 billion from the sale of interests in various projects.

However, if we talk about fair capitalization, according to the calculations of some banks, “Rosneft” has almost caught up with Gazprom.

— According to our estimates, the fair price of Rosneft — us $4.4 per share is $46.6 billion, “Gazprom” is $4 – $47.3 billion, so, at least they have equaled, says Maxim Moshkov from USB.

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