Pao Novatek has released its consolidated interim condensed financial statements as of and for the three and nine months ended 30 September 2019, prepared in accordance with International Financial Reporting Standards (IFRS).
Revenues and EBITDA
In 3Q19, the company’s total revenues and normalised EBITDA, including its share in EBITDA of joint ventures, amounted to RR 189.2 billion and RR 104.5 billion, respectively, representing decreases of 13.8% and 11.5% as compared to the prior year corresponding period. The decreases were primarily due to lower hydrocarbons sales prices on international markets in 2019, which were largely offset by an increase in the company’s natural gas sales volumes due to the production launch at the second and third LNG trains at Yamal LNG in July and November 2018, respectively.
In the nine months ended 30 September 2019, Novatek’s total revenues and normalised EBITDA, including its share in EBITDA of joint ventures, increased to RR 641.8 billion and RR 338.3 billion, respectively, or by 7.9% and 14.4%, as compared to the corresponding period in 2018. This was largely due to an increase in LNG sales volumes and the company’s domestic average natural gas sales price, which was offset by a decrease in hydrocarbons sales prices on international markets in 2019.
Profit attributable to shareholders of Pao Novatek
Profit attributable to shareholders of Pao Novatek increased to RR 370.0 billion (RR 122.86 per share), or eight-fold, in 3Q19 and to RR 820.9 billion (RR 272.59 per share), or nearly seven-fold, in the nine months of 2019 as compared to the corresponding periods in 2018. the company’s profit was significantly impacted by the recognition of a net gain on disposal of a 10% and a 30% participation interests in Arctic LNG 2 project in March and July 2019, respectively, taken together amounting to RR 675.0 billion. In addition, its profit was impacted by the recognition of non-cash foreign exchange effects on foreign currency denominated loans of the group and its joint ventures in both reporting periods.
Excluding the effect from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange differences, normalised profit attributable to shareholders of Pao Novatek totalled RR 48.5 billion (RR 16.12 per share) in 3Q19 and RR 178.6 billion (RR 59.29 per share) in the nine months of 2019. This represented a decrease of 25.9% and an increase of 7.1%, respectively, as compared to the corresponding periods in 2018.
Cash used for capital expenditures
Novatek’s cash used for capital expenditures increased to RR 36.5 billion, or by 47.4%, in 3Q19 and to RR 110.2 billion, or by 94.9%, in the nine months of 2019 as compared to the prior year corresponding periods. A significant portion of the company’s capital expenditures related to the development of its LNG projects (Arctic LNG 2 project prior to March 2019 and the LNG construction centre located in the Murmansk region), the North-Russkoye field, the Beregovoye field, crude oil deposits of the East-Tarkosalinskoye and the Yarudeyskoye fields, and exploratory drilling.
Total natural gas production, including Novatek’s proportionate share in the production of joint ventures, for the third quarter and the nine months of 2019 increased by 5.3% and 11.1%, respectively, and the company’s total liquids production increased by 4.5% and 3.3%, respectively, as compared to the corresponding periods in 2018. The main factors positively affecting the production increase were the launch of LNG production at the second and third LNG trains at Yamal LNG in July and November 2018, respectively, and the commencement of crude oil commercial production at the Yaro-Yakhinskoye field of the company’s joint venture Arcticgas in December 2018.
In the third quarter and the nine months of 2019, Novatek’s natural gas sales volumes totalled 16.7 billion and 57.7 billion m3, representing increases of 7.1% and 13.1%, respectively, as compared to the corresponding periods in 2018, due to an increase in LNG sales volumes purchased mainly from the company’s joint ventures OAO Yamal LNG and OOO Cryogas-Vysotsk. As of 30 September 2019, we recorded 1.8 billion m3 of natural gas in inventory balances compared to 2.4 billion m3 at 30 September 2018 relating mainly to natural gas in the Underground Gas Storage Facilities. Natural gas inventory balances depend on the group’s demand for natural gas withdrawals for the sale in the subsequent periods.
In the third quarter and the nine months of 2019, Novatek’s liquid hydrocarbons sales volumes totalled 4.0 million and 12.1 million t, representing increases of 1.7% and 1.0%, respectively, as compared to the corresponding periods in 2018. The increases were mainly due to crude oil purchases from the company’s joint venture Arcticgas resulting from the commencement of crude oil production at the Yaro-Yakhinskoye field in December 2018. As at 30 September 2019, the company recorded 938 million t of liquid hydrocarbons in transit or storage and recognised as inventory as compared to 850 million t on 30 September 2018. The company’s liquid hydrocarbon inventory balances tend to fluctuate period on period and are usually realised in the following reporting period.