Rosneft Beats Earnings Estimates as Costs Decline Amid Oil Rout

  • Free cash flow totals $1.5 billion, Ebitda margin expands
  • Company boosts spending in bid to revive flagging production

Rosneft OJSC reported earnings that beat analyst estimates after cutting costs to weather crude’s collapse. The Russian oil giant rose to a one-month high in Moscow trading.

Earnings before interest, taxes, depreciation and amortization fell to 273 billion rubles ($4.2 billion) in the first quarter from 319 billion rubles a year earlier, exceeding the 257 billion-ruble average estimate of 10 analysts surveyed by Bloomberg. Net income dropped 75 percent to 14 billion rubles.

A weaker ruble and a tax system that adjusts to moves in the oil market have helped Russian producers weather the downturn. Benchmark Brent crude averaged $34.52 a barrel in the first quarter, down from more than $100 in the same period of 2014, as global supply continued to overwhelm demand. Russia’s largest oil company has boosted efficiencies and cut costs to ride out the slump.

Extraction costs fell to 155 rubles a barrel, helping to drive the Ebitda margin to 26 percent from 24.1 percent a year earlier, Rosneft said Wednesday in a statement. Its shares rose as much as 2.8 percent to 338 rubles in Moscow, the highest intraday price since May 5, and were at 337.4 rubles as of 11:28 a.m. local time.

Free Cash

“Lifting costs are actually down,” Ildar Davletshin, an oil and gas analyst at Renaissance Capital Ltd., said by e-mail. Rosneft produced $1.5 billion in free cash flow in a “$35 oil environment,” he said.

The company increased capital spending in the first quarter to 154 billion rubles as it worked to start the Suzun and Yurubcheno-Tokhomskoe fields. Spending may rise to as much as 1 trillion rubles this year from 595 billion rubles last year as Rosneft seeks to revive production.

Oil and gas output was little changed at 5.21 million barrels of oil equivalent a day in the period. Crude and liquids fell 1 percent to 4.09 million barrels a day, while natural-gas volumes rose 4.7 percent to 1.12 million barrels of oil equivalent a day, according to the statement.

Net debt dropped to 1.61 trillion rubles in the quarter from 1.69 trillion rubles at the end of last year. Rosneft also delivered oil that settled $800 million worth of advance payments it had received for long-term supply deals with clients including Glencore Plc and Trafigura Beheer BV.

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