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Rosneft: US GAAP results for 9 months 2009

Contributed by Veles Capital

By Dmitriy Lyutyagin (Veles Capital)

Rosneft output its financial report by US GAAP for 9 months of 2009. The company gained 4.84 bn USD of net profit (down by 53.2%). Sales slipped by 44.6% and formed 32.26 bn USD, while the oil prices reduced by 47.5% (the company was supported by the growth of operating results: oil extraction grew by 1.1%, oil products output – by 0.8%). Operating profit dropped by 54.3%. Operating margin slipped by 4.2 p.p. to 19.7%.

The provided report of Rosneft within 9 months of 2009 might be characterized as moderately weak. That is explained by the growth of debt load in 3Q 2009 due to the effect of “Kudrin’s scissors”. Also the estimates of the net profit were negatively affected by the accounted negative currency exchange amounting 247 mn USD and the reserves on claims on behalf of FAS in the amount of 182 mn USD.

At the same time several shades such as the net debt reduction, upping of the operating estimates of extraction and processing, high positive cash flow of 2.2 bn USD by the results of 9 months 2009, which allow indicating the fact that if the price conjuncture improves the company shows financial estimates climbing and profitability recovering. Currently the management of Rosneft has positive view over the fourth quarter of 2009 versus 3Q, which comes from the positive conjuncture by the end of the first two months of the quarter.

More to that, as the oil extraction grows at Vankorskoe deposit and the oil export from it increases, the share of high-margin sales climbs due to since December 1 of the current year the government of RF zeroes the export duty for oil from 13 East Siberian deposits, including Vankorskoe. Next year the growth of daily average extraction from Vankorskoe deposit will form more than 70%.