News & Analysis » Russia

TNK-BP publishes US GAAP 9M 2009 financials

By Finam

On October 27, TNK-BP Limited released interim US GAAP consolidated financials for the first nine months of 2009. It is customary for us to analyze this company’s financials as we regard them as a good benchmark for the financial analysis of TNK-BP Holding, a TNK-BP Limited subsidiary, whose shares are listed on the stock exchange.

The statement reveals a 44% drop in revenue y-o-y to USD 24.7 billion, with the shrinkage blamed largely on a 48% fall in average Urals oil prices. The drop in prices was marginally offset by a 3% growth in hydrocarbon extraction at the company, to 1.68 million barrels of oil equivalent daily. We should note that this indicator takes no account of production results from Slavneft and, therefore, accurately reflects the level of production at TNK-BP Holding. In the third quarter, its production picked up 1.2% q-o-q, markedly outstripping average growth in the sector.

Overall expenses, net of depreciation, fell 45% to USD 18.1 billion, enabling the company to widen its operating margin as compared to last year. The EBITDA margin notably grew to 27%, slightly up on the sector average. The 25% cut in operating expenses is mainly linked to a 26% weakening of the dollar rate against the ruble. All the same, when adjusted for this effect, the result looks much better than the sector average. The main reason for this is the company’s active application of in-house recovery rate enhancement technology. In other respects, the cut in expenses is largely due to a decrease in the MET and export duties on oil, the same as with other oil companies.

Net income shrank 44% to USD 3.7 billion. The net margin did not change, and is now slightly below the sector average. Thanks to its thought-out debt management policy amid the crisis, the company saw its financial leverage ease a little over the past quarter, with net debt declining 11% to USD 5.1 billion. However, as the company is in active search of foreign acquisition targets, its debt may rise again in the future.

In general, TNK-BP has shown positive results, consolidating its second-quarter success. We stick to our opinion that the company has strong potential for growth in fundamental terms.